Do economic freedom, innovation, and technology enhance Chinese FDI? A cross-country panel data analysis

Abstract

This study evaluates the determinants of Economic freedom, innovation and technology concerning Chinese foreign direct investment. The aim of the study is to explore, that how these determinants influence Outward Foreign Direct Investment (OFDI) from China toward different regional economies. The study will enrich the existing literature by providing useful policies to the concerned economies to influence more Chinese FDI to host economies. The panel data set includes 27 (African, European, and Asian) Countries data over the period of 2003 to 2018. Moreover, the study employed panel data analysis and the result reveals that property rights, patents residents (pantentAR), Research & Development (R&D), Inflation, official exchange rate (OER), and Tax Burden (TaxB) have a strong positive and significant impact on Chinese OFDI in the selected sample countries, While Government Expenditures (GovE) has positive, but insignificant impact on Chinese OFDI. On the other hand, Chinese OFDI is negatively and statistically significant association with Business Freedom (BusF). This study will put forth considerable policies to the concerned to induce further inflows of Chinese FDI into the host countries. The policymakers should build policies that provide a comfortable environment for business activities and mostly focus on value-added production i.e., expenditures on R&D to enhance high-technology exports because they efficiently attract FDI into host countries. Another key factor is Tax Burden (TaxB), which significantly influences Chinese FDI along with other factors.

Keywords

• Economic freedom
• Innovations
• Technology
• Chinese foreign direct investment