Outward Foreign Direct Investment of Chinese Enterprises

<p>Chapter 1&nbsp;&nbsp; The Exceptional Performance of Chinese Outward Direct Investment Firms 6</p><p>1&nbsp;&nbsp;&nbsp;&nbsp; Introduction. 6</p><p>2&nbsp;&nbsp;&nbsp;&nbsp; Literature Review.. 7</p><p>3 Data and Empirics 8</p><p>3.1 Data. 8</p><p>3.2 Empirical Results 10</p><p>3.3 Benchmark Estimates 10</p><p>3.4 Alternative Measure of Firm Performance. 11</p><p>3.5 Robustness Checks 11</p><p>4&nbsp;&nbsp;&nbsp;&nbsp; Policy Suggestions 14</p><p>5&nbsp;&nbsp;&nbsp;&nbsp; Conclusions 15</p><p>Chapter 2&nbsp;&nbsp; Firm Productivity and Outward Foreign Direct Investment: A Firm- Level Empirical Investigation of China. 17</p><p>1 Introduction. 17</p><p>2 Data and Measurement 20</p><p>3 Determinants Affecting Enterprises’ Entry into the FDI Market 24</p><p>4&nbsp;&nbsp;&nbsp;&nbsp; Enterprise Productivity and the Enterprise FDI Decision. 29</p>4.1 Impact of the Firm’s Productivity on Its OFDI Decision. 29<p></p><p>4.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Endogeneity between OFDI and Firm Productivity. 31</p><p>4.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Relationship between Firm Productivity and Income Level of the Destination Country. 32</p><p>4.4 Enterprise OFDI and Industry Labor Intensity. 35</p><p>5 Impact of Firm Productivity on the Volume of OFDI 36</p><p>5.1 Benchmark Regression. 37</p><p>5.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Endogeneity Analysis 38</p><p>5.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Additional Robustness Tests: Analysis Based on the Gravity Equation. 40</p><p>6 Summary. 41</p><p>Appendix. Estimation of TFP Using the Olley and Pakes (1996) Method. 42</p><p>Chapter 3&nbsp;&nbsp; Distribution, outward FDI, and productivity heterogeneity: China and cross-countries’ evidence. 44</p><p>1 Introduction. 44</p><p>2 Model 47</p><p>3 Data and measures 51</p><p>3.1 FDI decision data. 51</p><p>3.2 FDI flow data. 52</p><p>3.3 Firm-level production data. 52</p><p>3.4 Data merge. 53</p><p>4. Extensive margin of FDI 56</p><p>4.1 Descriptive analysis on productivity differences 56</p><p>4.2 Extensive margin of FDI 58</p><p>4.3 Estimates with rare events corrections 59</p><p>4.4 Multinomial logit estimates with distribution FDI 61</p><p>4.5 Endogeneity of firm productivity. 64</p><p>4.6 Discussions of fixed costs ordering. 65</p><p>5 Type-2 Tobit estimates of intensive margin. 67</p><p>6 Investment destination. 69</p><p>6.1 Communication costs in destination markets 69</p><p>6.2 Investment decision by destination income. 71</p><p>6.3. Threshold estimates of the linder hypothesis 73</p><p>7 Concluding remarks 74</p><p>Chapter 4&nbsp;&nbsp; Outward FDI and Domestic Input D Distortions: Evidence from Chinese Firms 76</p><p>1 Motivation and Findings 76</p><p>2 Data and Stylised Facts 80</p><p>2.1 Data. 80</p><p>2.2 Measures 82</p><p>2.3 Stylised Facts 84</p><p>3 Model 91</p><p>3.1 Setup. 91</p><p>3.2 Domestic Production, Exporting and FDI 93</p><p>3.3 Domestic Distortion and Patterns of Outward FDI 95</p><p>4 Evidence. 102</p><p>4.1 FDI Decision and Firm Ownership. 102</p><p>4.2 Input Market Distortions 104</p><p>4.3 Channels and Sectoral Heterogeneity. 106</p><p>4.4 Capital Intensity and Pattern of Outward FDI 107</p><p>4.5 Estimates at the Intensive Margin. 108</p><p>4.6 Outward FDI Data between 2000 and 2013. 109</p><p>5 Concluding Remarks 110</p><p>Chapter 5&nbsp;&nbsp; Does Outward FDI Generate Higher Productivity for Emerging Economy MNEs? – Micro-level Evidence from Chinese Manufacturing Firms 111</p><p>1 Introduction. 111</p><p>2 Literature review and hypothesis development 114</p><p>2.1 OFDI and EMEs’ productivity growth. 119</p><p>2.2 State ownership and OFDI’s productivity effect on EMEs 121</p><p>2.3 Absorptive capacity and OFDI’s productivity effect on EMEs 124</p><p>2.4 Investment destination and OFDI’s productivity effect on EMEs 124</p><p>3&nbsp;&nbsp;&nbsp;&nbsp; Methodology. 126</p><p>3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Data. 126</p><p>3.2 Measures 127</p><p>3.3 Econometric Model 129</p><p>4 Estimation Results 131</p><p>4.1 Results at the Overall Manufacturing Level 131</p><p>4.2 State ownership and OFDI’s productivity effect on EMEs 132</p><p>4.3 Absorptive capacity and OFDI’s productivity effect on EMEs 132</p><p>4.4 Investment Destination and OFDI’s productivity effect on EMEs 133</p><p>5 Robustness Check and Further Analysis 135</p><p>5.1 An Alternative Measure of Total Factor Productivity. 135</p><p>5.2 Investment Destination Measured by Patent Application Per Capita. 135</p><p>5.3 One-Step System GMM Approach to Estimate the OFDI’s Productivity Effect 135</p><p>5.4 Absorptive capacity and OFDI’s productivity effect in non-technology-intensive industries 136</p><p>6 Discussion and Conclusion. 136</p><p>6.1 Theoretical Implications 136</p><p>6.2 Policy and managerial implications 137</p><p>6.3 Limitations and future research directions 138</p><p>Chapter 6&nbsp;&nbsp; Outward Direct Investment, Firm Productivity and Credit Constraints: Evidence from Chinese Firms 140</p><p>1 Introduction. 140</p><p>2 Data and variables 142</p><p>2.1 Firm-level data in Zhejiang Province. 142</p><p>2.2 Variables 143</p><p>3 Firm heterogeneity and ODI decision. 144</p><p>3.1 Model specification and basic results 144</p><p>3.2 Interaction effect between productivity and financial constraint 147</p><p>3.3 Robustness check: First time exporting or outward direct investment 148</p><p>4 Firm heterogeneity and outward direct investment value 149</p><p>4.1 Model specification. 149</p><p>4.2 Estimation result 149</p><p>5 Conclusion. 150</p><p>Chapter 7&nbsp;&nbsp; The potential impact of China–US BIT on China’s manufacturing sectors 151</p><p>1 Literature review.. 152</p><p>2 Assumptions on the scenarios of China–US BIT, focusing on manufacturing. 154</p><p>3 BIT’s open market requirements to China’s manufacturing sector and its impacts on relevant industries 154</p><p>3.1 Impacts of FDI on domestic firms 154</p><p>3.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FDI’s overall impacts on performance of domestic firms 155</p><p>3.3 FDI’s impacts on specific industries 156</p><p>3.4 The effects of changes in policies on scale or shares of FDI 158</p><p>4 Suggestions on negotiation strategy. 160</p><p>4.1 Make it firm and steadfast that China is serious in joining BIT. 160</p><p>4.2 Protection measures in the long-run. 161</p><p>4.3 Gradual lifting process of protection for certain vulnerable sectors 163</p><p>4.4 Cooperating in BIT negotiation with the domestic reform.. 163</p><p>5 Suggestions to manufacturing firms regarding how to face the challenges of BIT. 163</p><p>5.1 Suggestions for domestic firms 163</p><p>5.2 Suggestions for government 164</p><p>6 Conclusions 164</p><p>Appendix. 165</p><p>Chapter 8&nbsp;&nbsp; China’s Opening-Up Policies: Achievements and Prospects 171</p><p>1 Expanding the Extensive Margin, 1978–2000. 172</p><p>1.1 Setting Up Special Economic Zones and Industrial Parks 172</p><p>1.2 Relaxing Market Access for Foreign Direct Investment 173</p><p>1.3 Reducing Import Tariffs 174</p><p>1.4 Encouraging the Processing Trade. 174</p><p>1.5 Comments on the Stage of External Opening. 176</p><p>2 Internal Opening Up, 2001–2017. 176</p><p>2.1 Accession to the WTO.. 177</p><p>2.2 Expanding Market Access for FDI 178</p><p>2.3 Relaxation of Outward FDI 179</p><p>2.4 Establishment of Pilot Free Trade Zones 181</p><p>2.5 New-Economy Pilot Cities Experiment 181</p><p>2.6 Comments on the Stage of Intensive Margin of Opening Up. 182</p><p>3 Features of the All-Around Opening Up. 184</p><p>3.1 Belt and Road Initiative. 184</p><p>3.2 Free Trade Ports Experiment 184</p><p>3.3 Greater Bay Area. 184</p><p>4 Policy Recommendations 185</p><p>5 Conclusion. 186</p><p>Appendix A for “Distribution, outward FDI, and productivity heterogeneity: China and cross-countries’ evidence”. 188</p><p>Appendix A1: Proof of Proposition 1. 188</p><p>Appendix A2: Proof of Proposition 2. 190</p><p>Appendix A3: Distribution of Zhejiang FDI Firms 191</p><p>Appendix A4: TFP Measure. 192</p><p>Appendix A5: Extensive Margin Estimates of Zhejiang Sample. 194</p><p>Appendix B for “Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms”. 197</p><p>1 Online Appendix A: Proofs 197</p><p>1.1 Proof of Proposition 1. 197</p><p>1.2 Proof of Proposition 2. 198</p><p>1.3 Proof of Proposition 3. 199</p><p>2 Online Appendix B: Outward FDI between 2000 and 2013. 200</p><p>3 Online Appendix C: Variants of the Model 205</p><p>3.1 Fixed FDI Cost 205</p><p>3.2 Variable FDI Cost 206</p><p>4 Online Appendix D: Propensity Score Matching for Productivity Comparison. 206</p><p> </p><p>5 Tables for Online Appendix. 207</p>