Does institutional difference affect Chinese outward foreign direct investment? Evidence from fuel and non-fuel natural resources

Abstract

This article investigates the impact of institutional difference and natural resource endowment in developing host countries on the location choice of Chinese OFDI. We found that institutional difference between China and host countries insignificantly affect the flow of Chinese OFDI, however, when observed on sectoral levels; Chinese investment is responsive to the institutional difference in non-fuel natural resource rich countries while institutional difference asserts insignificant influence on Chinese OFDI in fuel resource rich countries. This shows that institutions play a role in the location choice of Chinese OFDI but, it depends on the sector and institutional proximity.