Multi-dimensional Complementarities and the Growth Impact of Direct Investment from China on Host Countries (Xiaolan Fu)
This paper examines the growth impact of developing country outward direct investment (OFDI) on the economic growth in host developing countries using a cross country panel dataset of Chinese OFDI over the 2003-2010 period. It finds that the growth effect of Chinese OFDI is determined by the multi-dimensional complementarities between the particular FDI flow, which is host country-specific, and the host economies. Overall Chinese OFDI appears to have a positive and significant impact on their long-run economic growth in host economies despite a negative association with short-run growth as Chinese OFDI seeks a variety of objectives in addition to a high growth market. Chinese OFDI appears to have contributed positively to the economic growth not only in Africa but also in Europe and North America. However, its contribution in Asia and Latin America is insignificant. Although the illustration of Chinese OFDI being mainly resource-seeking is exaggerating and misleading, Chinese OFDI in resource-rich country cannot avoid the resource curse either.