China's outward foreign direct investment and bilateral export sophistication: a cross countries panel data analysis

Abstract

Purpose China's outward foreign direct investment (OFDI) has risen remarkably over the past two decades. Does such increase affect the sophistication of Chinese exports, is a significant issue that has surprisingly remained unaddressed? The purpose of this study is to investigate the impact of Chinese OFDI on bilateral export sophistication of China and its OFDI receiving partner countries during 2003–2017 by applying Poisson pseudo-maximum likelihood approach based on gravity model. Design/methodology/approach The analysis has been performed for total sample, region-wise grouped sample (Europe and Central Asia, Middle East and North Africa, Latin America and Caribbean, East Asia and Pacific, South Asia, North America and sub-Saharan Africa) and income-wise grouped sample (high income, upper middle income, lower middle income and lower income group sample). Findings The results confirmed the significant and positive effect of Chinese OFDI on bilateral export sophistication in total sample, regions-wise and income groups sample. Originality/value The study provides a helpful suggestion regarding policy towards achieving more sophistication in export and thus to achieve comparative advantage in trade.