Is Mena different ? : an investigation of the host country determinants of Chinese outward

Abstract EN

The objectives of this paper are twofold; to investigate the host country determinants of Chinese Outward Foreign Direct Investment (OFDI) in general and to examine, given these determinants, if Chinese OFDI in MENA is different (less) than elsewhere.

We obtained data for the top forty Chinese OFDI recipients worldwide and that included seven MENA countries from 2003-2012.

Using a pooled ordinary least squares estimation technique on the lagged explanatory variables and the lagged dependent variable – flows and stocks alternatively – with robust standard errors, we found the following: Chinese OFDI is market seeking, resource seeking, and efficiency seeking and that it is not deterred by poor governance but on the contrary is attracted to it.

Chinese OFDI follows its exports and relocates probably to evade barriers to trade in third markets.

The seven MENA countries seemingly receive significantly less Chinese OFDI flows compared to other countries because they are less open, have lower labor productivity and do not import as much on average from China as other non-MENA countries.

However, careful inspection shows that UAE is creating this bias; in other words, UAE is the reason Chinese OFDI to the MENA_7 is significantly less than in other countries.

This maybe because exporting to UAE rather than licensing or FDI seems like the best scenario, or UAE is already satiated with FDI from other countries, or China is waiting for the right time to enter such an FDI-competitive market like that of UAE.