Potential and Challenges of Chinese Direct Investment into ASEAN

Yong Li

doi:doi:10.11648/j.sjbm.20210902.13

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Potential and Challenges of Chinese Direct Investment into ASEAN

Yong Li

Published in Science Journal of Business and Management (Volume 9, Issue 2)

Received: 20 April 2021 Accepted: Published: 4 June 2021

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Abstract

Although China’s outward direct investment (CODI) has been ranked number one for 25 years among developing countries, between 1995 and 2019, increased more than 66 times, from about US$ 2.0 billion to US$136.91 billion, and the Association of South East Asian Nations (ASEAN) is the most attractive world destination for foreign direct investment (FDI) due to its location advantages in terms of low labor cost, potential market size, CODI to ASEAN has been hovering at a very low level, accounting for only about 9.51% of China’s total outward direct investments. The relatively small CODI to ASEAN raises a question of how well the theories of FDI explain the interaction of China investors and ASEAN's location characteristics. This article tries to address the puzzle of a small share of CODI in ASEAN by investigating the determinants of CODI in ASEAN over the period 1995 to 2019. Evidence presented in this article indicates that the small CODI cannot be fully appreciated without understanding differences between CODI in ASEAN and that in EU, the latter attracting CODI at full speed. Empirical results suggest that the CODI in ASEAN was primarily motivated by natural resource and market access, and that in EU was technical and strategic assets oriented. The main purpose of Chinese investors to invest abroad is not to use their existing ownership advantages expanding overseas production, but to compensate their disadvantage and improve competitiveness to strengthen the domestic production. The small CODI in ASEAN thus is a result of China investors' strong interest in gaining raw materials, skilled labor, sale channels and potential market for its export rather than benefiting from cheap labor and ASEAN's export and employment-promotion FDI regime, poor infrastructure, containment attitude for Chinese investors, along with the political instabilities in ASEAN.

Published in	Science Journal of Business and Management (Volume 9, Issue 2)
DOI	10.11648/j.sjbm.20210902.13
Page(s)	67-73
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

China’s Outward Direct Investment (CODI), ASEAN, EU

References

[1]	MOFCOM, 2020, the 2018 Statistical Bulletin of China’s Outward Foreign Direct Investment, https://www.sohu.com/a/422787391_825950
[2]	The ASEAN Secretariat, ASEAN statistical yearbook, 2020, https://asean.org/storage/2018/12/asyb-2019.pdf
[3]	Asiedu, E. 2006. Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability, The World Economy, 29: 63–77.
[4]	Buckley, Peter. J., Clegg, J., Cross, A., Liu, X., Voss, H. and Zheng, P. 2007. The Determinants of Chinese Outward Foreign Direct Investment, Journal of International Business Studies, 38: 499-518.
[5]	Morck, R., Yeung, B., & Zhao, M. 2007. Perspectives on China’s Outward Foreign Direct Investment. Journal of International Business Studie, 39: 337-350.
[6]	Cheung, Y. W., Haan, J. D., Qian, X., & Yu, S. 2011. China's outward direct investment in africa," Hong Kong institute for monetary research working papers. Ssrn Electronic Journal.
[7]	Nguyen, Thi Tuong Anh & Doan, Quang Hung, 2016. Chinese outward foreign direct investment: Is ASEAN a new destination? MPRA Paper 71890, University Library of Munich, Germany.
[8]	Lipsey, R. and Sjoholm, F. 2010. FDI and Growth in East Asia: Lessons for Indonesia, IFN Working Paper No. 852, Research Institute of Industrial Economics, Sweden.
[9]	Sussangkarn, C. and Nikomborirak, D. 2011. Trans-Pacific Rebalancing: Thailand Case Study’, ADBI Working Paper No. 273, Asian Development Bank Institute.
[10]	Chantapong, S. and Thanabodee, S. 2019. Thai Direct Investment in the Neighboring Countries: An Important Step to AEC, Focused and Quick (FAQ) Issue 71, Bank of Thailand.
[11]	Sun, Lin & Zhou, Kexuan & Yu, Linhui 2020. Does the reduction of regional trade policy uncertainty increase Chinese enterprises' outward foreign direct investment? Evidence from the China−ASEAN Free Trade Area, Pacific Economic Review, Wiley Blackwell, 25 (2): 127-144.
[12]	Clegg, L. J., and Voss, H. 2011. Inside the China-EU bilateral foreign direct investment bond. EU-China Investment Relationships. China & World Economy, 19 (4): 92-108.

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Yong Li. (2021). Potential and Challenges of Chinese Direct Investment into ASEAN. Science Journal of Business and Management, 9(2), 67-73. https://doi.org/10.11648/j.sjbm.20210902.13

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Yong Li. Potential and Challenges of Chinese Direct Investment into ASEAN. Sci. J. Bus. Manag. 2021, 9(2), 67-73. doi: 10.11648/j.sjbm.20210902.13

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Yong Li. Potential and Challenges of Chinese Direct Investment into ASEAN. Sci J Bus Manag. 2021;9(2):67-73. doi: 10.11648/j.sjbm.20210902.13

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@article{10.11648/j.sjbm.20210902.13,
  author = {Yong Li},
  title = {Potential and Challenges of Chinese Direct Investment into ASEAN},
  journal = {Science Journal of Business and Management},
  volume = {9},
  number = {2},
  pages = {67-73},
  doi = {10.11648/j.sjbm.20210902.13},
  url = {https://doi.org/10.11648/j.sjbm.20210902.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjbm.20210902.13},
  abstract = {Although China’s outward direct investment (CODI) has been ranked number one for 25 years among developing countries, between 1995 and 2019, increased more than 66 times, from about US$ 2.0 billion to US$136.91 billion, and the Association of South East Asian Nations (ASEAN) is the most attractive world destination for foreign direct investment (FDI) due to its location advantages in terms of low labor cost, potential market size, CODI to ASEAN has been hovering at a very low level, accounting for only about 9.51% of China’s total outward direct investments. The relatively small CODI to ASEAN raises a question of how well the theories of FDI explain the interaction of China investors and ASEAN's location characteristics. This article tries to address the puzzle of a small share of CODI in ASEAN by investigating the determinants of CODI in ASEAN over the period 1995 to 2019. Evidence presented in this article indicates that the small CODI cannot be fully appreciated without understanding differences between CODI in ASEAN and that in EU, the latter attracting CODI at full speed. Empirical results suggest that the CODI in ASEAN was primarily motivated by natural resource and market access, and that in EU was technical and strategic assets oriented. The main purpose of Chinese investors to invest abroad is not to use their existing ownership advantages expanding overseas production, but to compensate their disadvantage and improve competitiveness to strengthen the domestic production. The small CODI in ASEAN thus is a result of China investors' strong interest in gaining raw materials, skilled labor, sale channels and potential market for its export rather than benefiting from cheap labor and ASEAN's export and employment-promotion FDI regime, poor infrastructure, containment attitude for Chinese investors, along with the political instabilities in ASEAN.},
 year = {2021}
}

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TY  - JOUR
T1  - Potential and Challenges of Chinese Direct Investment into ASEAN
AU  - Yong Li
Y1  - 2021/06/04
PY  - 2021
N1  - https://doi.org/10.11648/j.sjbm.20210902.13
DO  - 10.11648/j.sjbm.20210902.13
T2  - Science Journal of Business and Management
JF  - Science Journal of Business and Management
JO  - Science Journal of Business and Management
SP  - 67
EP  - 73
PB  - Science Publishing Group
SN  - 2331-0634
UR  - https://doi.org/10.11648/j.sjbm.20210902.13
AB  - Although China’s outward direct investment (CODI) has been ranked number one for 25 years among developing countries, between 1995 and 2019, increased more than 66 times, from about US$ 2.0 billion to US$136.91 billion, and the Association of South East Asian Nations (ASEAN) is the most attractive world destination for foreign direct investment (FDI) due to its location advantages in terms of low labor cost, potential market size, CODI to ASEAN has been hovering at a very low level, accounting for only about 9.51% of China’s total outward direct investments. The relatively small CODI to ASEAN raises a question of how well the theories of FDI explain the interaction of China investors and ASEAN's location characteristics. This article tries to address the puzzle of a small share of CODI in ASEAN by investigating the determinants of CODI in ASEAN over the period 1995 to 2019. Evidence presented in this article indicates that the small CODI cannot be fully appreciated without understanding differences between CODI in ASEAN and that in EU, the latter attracting CODI at full speed. Empirical results suggest that the CODI in ASEAN was primarily motivated by natural resource and market access, and that in EU was technical and strategic assets oriented. The main purpose of Chinese investors to invest abroad is not to use their existing ownership advantages expanding overseas production, but to compensate their disadvantage and improve competitiveness to strengthen the domestic production. The small CODI in ASEAN thus is a result of China investors' strong interest in gaining raw materials, skilled labor, sale channels and potential market for its export rather than benefiting from cheap labor and ASEAN's export and employment-promotion FDI regime, poor infrastructure, containment attitude for Chinese investors, along with the political instabilities in ASEAN.
VL  - 9
IS  - 2
ER  -

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Author Information

Yong Li

Business School, China University of Political Science and Law, Beijing, China

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Yong Li. (2021). Potential and Challenges of Chinese Direct Investment into ASEAN. Science Journal of Business and Management, 9(2), 67-73. https://doi.org/10.11648/j.sjbm.20210902.13

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ACS Style

Yong Li. Potential and Challenges of Chinese Direct Investment into ASEAN. Sci. J. Bus. Manag. 2021, 9(2), 67-73. doi: 10.11648/j.sjbm.20210902.13

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AMA Style

Yong Li. Potential and Challenges of Chinese Direct Investment into ASEAN. Sci J Bus Manag. 2021;9(2):67-73. doi: 10.11648/j.sjbm.20210902.13

Copy | Download

@article{10.11648/j.sjbm.20210902.13,
  author = {Yong Li},
  title = {Potential and Challenges of Chinese Direct Investment into ASEAN},
  journal = {Science Journal of Business and Management},
  volume = {9},
  number = {2},
  pages = {67-73},
  doi = {10.11648/j.sjbm.20210902.13},
  url = {https://doi.org/10.11648/j.sjbm.20210902.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjbm.20210902.13},
  abstract = {Although China’s outward direct investment (CODI) has been ranked number one for 25 years among developing countries, between 1995 and 2019, increased more than 66 times, from about US$ 2.0 billion to US$136.91 billion, and the Association of South East Asian Nations (ASEAN) is the most attractive world destination for foreign direct investment (FDI) due to its location advantages in terms of low labor cost, potential market size, CODI to ASEAN has been hovering at a very low level, accounting for only about 9.51% of China’s total outward direct investments. The relatively small CODI to ASEAN raises a question of how well the theories of FDI explain the interaction of China investors and ASEAN's location characteristics. This article tries to address the puzzle of a small share of CODI in ASEAN by investigating the determinants of CODI in ASEAN over the period 1995 to 2019. Evidence presented in this article indicates that the small CODI cannot be fully appreciated without understanding differences between CODI in ASEAN and that in EU, the latter attracting CODI at full speed. Empirical results suggest that the CODI in ASEAN was primarily motivated by natural resource and market access, and that in EU was technical and strategic assets oriented. The main purpose of Chinese investors to invest abroad is not to use their existing ownership advantages expanding overseas production, but to compensate their disadvantage and improve competitiveness to strengthen the domestic production. The small CODI in ASEAN thus is a result of China investors' strong interest in gaining raw materials, skilled labor, sale channels and potential market for its export rather than benefiting from cheap labor and ASEAN's export and employment-promotion FDI regime, poor infrastructure, containment attitude for Chinese investors, along with the political instabilities in ASEAN.},
 year = {2021}
}

Copy | Download

TY  - JOUR
T1  - Potential and Challenges of Chinese Direct Investment into ASEAN
AU  - Yong Li
Y1  - 2021/06/04
PY  - 2021
N1  - https://doi.org/10.11648/j.sjbm.20210902.13
DO  - 10.11648/j.sjbm.20210902.13
T2  - Science Journal of Business and Management
JF  - Science Journal of Business and Management
JO  - Science Journal of Business and Management
SP  - 67
EP  - 73
PB  - Science Publishing Group
SN  - 2331-0634
UR  - https://doi.org/10.11648/j.sjbm.20210902.13
AB  - Although China’s outward direct investment (CODI) has been ranked number one for 25 years among developing countries, between 1995 and 2019, increased more than 66 times, from about US$ 2.0 billion to US$136.91 billion, and the Association of South East Asian Nations (ASEAN) is the most attractive world destination for foreign direct investment (FDI) due to its location advantages in terms of low labor cost, potential market size, CODI to ASEAN has been hovering at a very low level, accounting for only about 9.51% of China’s total outward direct investments. The relatively small CODI to ASEAN raises a question of how well the theories of FDI explain the interaction of China investors and ASEAN's location characteristics. This article tries to address the puzzle of a small share of CODI in ASEAN by investigating the determinants of CODI in ASEAN over the period 1995 to 2019. Evidence presented in this article indicates that the small CODI cannot be fully appreciated without understanding differences between CODI in ASEAN and that in EU, the latter attracting CODI at full speed. Empirical results suggest that the CODI in ASEAN was primarily motivated by natural resource and market access, and that in EU was technical and strategic assets oriented. The main purpose of Chinese investors to invest abroad is not to use their existing ownership advantages expanding overseas production, but to compensate their disadvantage and improve competitiveness to strengthen the domestic production. The small CODI in ASEAN thus is a result of China investors' strong interest in gaining raw materials, skilled labor, sale channels and potential market for its export rather than benefiting from cheap labor and ASEAN's export and employment-promotion FDI regime, poor infrastructure, containment attitude for Chinese investors, along with the political instabilities in ASEAN.
VL  - 9
IS  - 2
ER  -

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