Determinants Of Chinese Outward Foreign Direct Investment In Central And Eastern European Countries

Chinese outward foreign direct investment has in recent years experienced unprecedented growth.Structural surplus in the financial account of China's balance of payments lead to gradual liberalization of policies governing Chinese outward investment.At the present,administrative controls over the overseas investment are only minimal as compared with the situation in China a decade or two ago.In most of the cases,enterprises investing overseas do not need an approval,all they need is filling with relevant local authorities.Moreover,Chinese government is also providing a variety of possible funding sources,such as below-market rate loans,or subsidies associated with the official aid programs.Thanks to the rapid growth of the Chinese outward investment globally,European Union became one of the important targets of Chinese investors.This is obvious not only from the large number of M&A deals in the European big traditional economies,but Chinese investment has also emerged in the regions that had almost no Chinese investment before-countries of Central and Eastern Europe.While most of the M&A deals in the Western European countries are motivated by strategic asset-seeking,investments into CEE countries(mostly greenfield investments)do not bring any upgrade of the strategic assets to the investing enterprise.They are,however,a convenient low-cost alternative to get access to the European single market.Chinese outward foreign direct investment has appeared in the CEE region,and has been growing ever since.However,the investment pattern seems to be uneven and a bit hard to explain.This study investigates the determinants of Chinese outward direct investment in the CEE region,and the extent to which political relations between China and individual CEE countries determine the amount of Chinese investment flows to these countries.This study comes up with a set of political,cultural-proximity,and economic variables.The hypotheses were developed in line with existing works done by other authors.The results show that market size,market growth,or the volume of international trade of the CEE countries do not have significant impact on the Chinese investment flows into these countries.Therefore,they do not show support for the argument that the Chinese investment pattern in the CEE region can be explained by market characteristics of the countries.On the other hand,number of bilateral senior visits between China and CEE countries does have a significant positive impact on the amount of Chinese investment flows into these countries,and so does the size of Chinese diaspora living in the countries.Therefore,the conclusion is that good political relations between China and CEE countries,and the size of Chinese population living in the CEE countries can explain the Chinese investment pattern in the CEE region.