Digital economy’s role in shaping China’s outward investment in Belt and Road countries
Abstract
Previous international investment-related literature is less likely to include host country digital economy as an influential factor in the analysis framework. Meanwhile digital economy-related literature mainly focuses on the concept and characteristics of digital economy, and few scholars explore the impact and mechanism of China’s OFDI in the context of digital economy. Based on the theory and mechanism analysis, this article first constructs a comprehensive digital economy indicator system using data from 46 B&R countries from 2004 to 2020 and then constructs extended investment gravity model, technological innovation intermediary impact and trade cost moderating effect to thoroughly investigate the effect and fundamental mechanism of digital economy on China’s OFDI. The conclusions are as follows: First, digital economy indicators’ computation reveals significant disparities among B&R countries. Second, baseline regression finds that B&R countries’ digital economy considerably boosts China’s OFDI. Third, regional heterogeneity reveals that digital economy in ASEAN countries plays a more visible role in boosting China’s OFDI. Fourth, mechanism analysis reveals that B&R countries’ digital economy can encourage China’s OFDI by improving technological innovation and reducing trade costs.
First published online 6 December 2024
Keyword : Belt and Road countries, digital economy, outward foreign direct investment, mechanism analysis
How to Cite
Tang, W., Lan, Q., & Yang, Y. (2024). Digital economy’s role in shaping China’s outward investment in Belt and Road countries. Technological and Economic Development of Economy, 1-35. https://doi.org/10.3846/tede.2024.21905
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Liu, L. R., & Nath, H. K. (2013). Information and communications technology and trade in emerging market economies. Emerging Markets Finance and Trade, 496, 67–87. https://doi.org/10.2753/REE1540-496X490605
Liu, Y. P., & Guo, J. J. (2020). The trade effect and heterogeneity of the Belt and Road Initiative –Empirical evaluation based on panel “counterfactual” approach. Contemporary Economic Management, 42(11), 51–62.
Liu, X. W., Zhang, Y., & Tian, J. L. (2022). Whether or not directed issuance of listed companies can improve the quality of information disclosure – based on the perspective of information regulation. Financial Regulation Research, (1), 39–57.
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Pradhan, R. P., Arvin, M. B., Nair, M., Bennett, S. E., & Bahmani, S. (2019). Short-term and long-term dynamics of venture capital and economic growth in a digital economy: A study of European countries. Technology in Society, 57, 125–134. https://doi.org/10.1016/j.techsoc.2018.11.002
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Slawotsky, J. (2022). Digital currencies and great power rivalry: China as a disseminator in the digital age. Asia Pacific Law Review, 30(2), 242–264. https://doi.org/10.1080/10192557.2022.2085412
Song, W. J., & Xu, H. W. (2012). Research on factors influencing the location choice of foreign direct investment. Research on Finance and Economics, (10), 44–50.
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Wang, Y. Q., Du, J. L., & Wang, K. (2014). Determinants of location choice of Chinese OFDI: Institutional, tax burden and resource endowment. Economic Research, 12, 126–142.
Wen, S. H., & Hu, Q. (2019). Institutional distance, proximity effect and Chinese direct investment in the countries of the Central South Peninsula. International Business, (3), 32–45.
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Xu, G. Y., Li, R. R., & Wang, Z. Q. (2024). OFDI operation modes and reverse technology spillovers: Implications for the quality of economic growth. International Review of Economics & Finance, 92(2).
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Yan, D., Y. (2013). Location choice of China’s outward FDI firms and the decisive factors. Journal of International Trade, (7), 128–135.
Yang, W. M., Su, L., & Wang, M. W. (2020). Digital inclusive finance and urban and rural residents’ income: Based on the mediating effect analysis of economic growth and entrepreneurial behavior. Journal of Shanghai University of Finance and Economics, 22(4), 83–94. https://doi.org/10.16538/j.cnki.jsufe.2020.04.006
Zhang, Y., Chen, Y., Zhang, R., Tu, W., &, Zhao, Y. (2024a). Outward foreign direct investment productivity along the belt and road. Economics & Politics, 36(2), 959–988. https://doi.org/10.1111/ecpo.12278
Zhang, Y., Zhang, Z., Jin, H., Tu, W., & Liu, Y. (2024b). Innovation and OFDI along the Belt and Road. Technological Forecasting and Social Change, 200(1), Article 123136. https://doi.org/10.1016/j.techfore.2023.123136
Zhou, C., & Liu, X. (2017). Business environment and China’s outward foreign direct investment: From the perspective of investment motivation. International Trade Issues, (10), 143–152. https://doi.org/10.13510/j.cnki.jit.2017.10.013
Banalieva, E. R., & Dhanaraj, C. (2019). Internalization theory for the digital economy. Journal of International Business Studies, 50, 1372–1387. https://doi.org/10.1057/s41267-019-00243-7
Berdykulova, G. M. K., Sailov, A. I. U., Kaliazhdarova, S. Y. K., & Berdykulov, E. B. U. (2014). The emerging digital economy: Case of Kazakhstan. Procedia – Social and Behavioral Sciences, 109, 1287–1291. https://doi.org/10.1016/j.sbspro.2013.12.626
Bi, X., & Yu, L. C. (2019). Environmental taxes and corporate technological innovation: Promote or inhibit? Research Management, 12(40), 116–125.
Buckley, P. J. (2009). The impact of the global factory on economic development. Journal of World Business, 44(2), 131–143. https://doi.org/10.1016/j.jwb.2008.05.003
Cao, S. W., & Qiu, J. Y. (2023). The impact of international digital economy development gap on China’s OFDI. Statistics and Decision Making, 131–135.
Cao, S. W., Xu, Y. D., & Tian, G. H. (2022). Research on the impact of digital economy on the motivation of FDI inflow in China – an empirical analysis based on panel data of 272 cities. Exploration of Economic Issues, (5), 17–31.
Casella, B., & Formenti, L. (2018). FDI in the digital economy: A shift to asset-light international footprints. Transnational Corporations, 25(1), 101–130. https://doi.org/10.18356/cb688e94-en
Centre d’études prospectives et d’informations internationals database (CEPII). (n.d.). http://www.cepii.fr/cepii/en/bdd_modele/bdd_modele.asp
Chaisse, J., & Bauer, C. (2020). Cybersecurity and the protection of digital assets: Assessing the role of international investment law and arbitration. Vanderbilt Journal of Entertainment and Technology Law, 21(3). https://doi.org/10.1017/9781316182383.003
Chaisse, J. (2023). ‘The black pit:’ Power and pitfalls of digital FDI and cross-border data flows. World Trade Review, 22(1), 73–89. https://doi.org/10.1017/S1474745622000337
Chaisse, J., & Kirkwood, J. (2020). Chinese puzzle: Anatomy of the (invisible) Belt and Road investment treaty. Journal of International Economic Law, 23(1), 245–269. https://doi.org/10.1093/jiel/jgz047
Chen, N., & Novy, D. (2012). On the measurement of trade costs: Direct vs. indirect approaches to quantifying standards and technical regulations. World Trade Review, 11(3), 401–414. https://doi.org/10.1017/S1474745612000183
Choi, C. (2010). The effect of the Internet on service trade. Economics Letters, 109(2): 102–104. https://doi.org/10.1016/j.econlet.2010.08.005
Gao, Z. X., & Lu, J. Y. (2020). The impact and revision of digital connectivity on investment development path theory: Evidence from China. Asia-Pacific Economic Review, (1), 96–105+151–152.
Ge, S. Q., Chen, J. Y., & Luo, W. (2022). Knowledge capital and the mode choice of Chinese enterprises’ international investment. Nankai Economic Studies, (2), 3–20.
Guo, H. M., Xu, M., & Wang, T. (2022). Review of research on accounting for digital economy. Statistics and Decision Making, 38(9), 5–10.
Hagiu, A. (2012). Econometric model concerning the status and evolution of the automotive industry in Romania. Annals of the University of Petroşani, Economics, 12(3), 83–96. https://www.upet.ro/annals/economics/pdf/2012/part3/Hagiu.pdf
Horoshko, O.-I., Horoshko, A., Bilyuga, S., & Horoshko, V. (2021). Theoretical and methodological bases of the study of the impact of digital economy on world policy in 21 century. Technological Forecasting & Social Change, 166(2), Article 120640. https://doi.org/10.1016/j.techfore.2021.120640
Horváth, E., & Klinkmüller, S. (2019). The concept of ‘investment’ in the digital economy: The case of social media companies. The Journal of World Investment & Trade, 20(4), 577–617. https://doi.org/10.1163/22119000-12340143
Ji, S. B., Li, S. H., & Ma, S. J. (2018). A study on the multidimensional distance impact of China’s OFDI to Belt and Road countries. World Economic Research, (1), 98–111+136.
Jullien, B. (2012). Two-sided B to B platforms. In M. Peitz & J. Waldfogel (Eds.), The Oxford handbook of the digital economy (pp. 161–186). Oxford University Press. https://doi.org/10.1093/oxfordhb/9780195397840.013.0007
Li, M., Zhang, Y. B., & Feng, D. (2016). Explicit comparative advantage measurement and international comparison study based on industry value added exports. Finance and Economics Theory and Practice, (4), 93–98.
Liu, H. Y., & Mao, H. O. (2016). The impact of manufacturing OFDI on export value added. China Industrial Economics, 7, 91–108. https://doi.org/10.19581/j.cnki.ciejournal.2016.07.007
Liu, L. R., & Nath, H. K. (2013). Information and communications technology and trade in emerging market economies. Emerging Markets Finance and Trade, 496, 67–87. https://doi.org/10.2753/REE1540-496X490605
Liu, Y. P., & Guo, J. J. (2020). The trade effect and heterogeneity of the Belt and Road Initiative –Empirical evaluation based on panel “counterfactual” approach. Contemporary Economic Management, 42(11), 51–62.
Liu, X. W., Zhang, Y., & Tian, J. L. (2022). Whether or not directed issuance of listed companies can improve the quality of information disclosure – based on the perspective of information regulation. Financial Regulation Research, (1), 39–57.
Lun, X. B., & Liu, Y. (2023). Achieving high-quality development along the digital “Belt and Road”. Journal of Shanghai University of Finance and Economics, 25(1), 64–78.
Pradhan, R. P., Arvin, M. B., Nair, M., Bennett, S. E., & Bahmani, S. (2019). Short-term and long-term dynamics of venture capital and economic growth in a digital economy: A study of European countries. Technology in Society, 57, 125–134. https://doi.org/10.1016/j.techsoc.2018.11.002
Poyhonen, P. (1963). A tentative model for the volume of trade between countries. Weltwirtschaftliches Archiv, 90, 93–100.
Ministry of Commerce of the People’s Republic of China, National Bureau of Statistics & State Administration of Foreign Exchange. (2020). Statistical bulletin of China’s outward foreign direct investment. China Commerce and Trade Press. https://www.gov.cn/xinwen/2021-09/29/5639984/files/a3015be4dc1f45458513ab39691d37dd.pdf
Shi, B. Z. (2016). Internet and international trade-empirical analysis based on bilateral two-way URL link data. Economic Research, 51(5), 172–187.
Slawotsky, J. (2022). Digital currencies and great power rivalry: China as a disseminator in the digital age. Asia Pacific Law Review, 30(2), 242–264. https://doi.org/10.1080/10192557.2022.2085412
Song, W. J., & Xu, H. W. (2012). Research on factors influencing the location choice of foreign direct investment. Research on Finance and Economics, (10), 44–50.
Tinbergen, J. (1962). Shaping the world economy: Suggestions for an international economic policy. The Twentieth Century Fund.
UN-COM trade database. (n.d.). https://comtradeplus.un.org/?trk=public_post-text
Wang, H., Si, I. C., & Chen, Z. H. (2024). Does the Belt and Road Initiative promote China and the countries along the route to reconstruct the global value chain? Evidence from value-added trade. Economic Analysis and Policy, 81, 63–83. https://doi.org/10.1016/j.eap.2023.11.030
Wang, Y. Q., Du, J. L., & Wang, K. (2014). Determinants of location choice of Chinese OFDI: Institutional, tax burden and resource endowment. Economic Research, 12, 126–142.
Wen, S. H., & Hu, Q. (2019). Institutional distance, proximity effect and Chinese direct investment in the countries of the Central South Peninsula. International Business, (3), 32–45.
World Bank database. (n.d.). https://data.worldbank.org
World Economic Forum. (2020). Global competitiveness report special edition 2020: How countries are performing on the road to recovery. https://www.weforum.org/publications/the-global-competitiveness-report-2020/
Xiao, Q., Gao, M., Chen, L., & Jiang, J. (2023). Dynamic multi-attribute evaluation of digital economy development in China: A perspective from interaction effect. Technological and Economic Development of Economy, 29(6), 1728–1752. https://doi.org/10.3846/tede.2023.20258
Xu, G. Y., Li, R. R., & Wang, Z. Q. (2024). OFDI operation modes and reverse technology spillovers: Implications for the quality of economic growth. International Review of Economics & Finance, 92(2).
Xu, H., Zhang, Y. L., & Cao, Y. J. (2020). Digital economy, technology spillovers and dynamic coopetition policy. Management World, 36(11), 63–84. https://doi.org/10.19744/j.cnki.11-1235/f.2020.0169
Yan, D., Y. (2013). Location choice of China’s outward FDI firms and the decisive factors. Journal of International Trade, (7), 128–135.
Yang, W. M., Su, L., & Wang, M. W. (2020). Digital inclusive finance and urban and rural residents’ income: Based on the mediating effect analysis of economic growth and entrepreneurial behavior. Journal of Shanghai University of Finance and Economics, 22(4), 83–94. https://doi.org/10.16538/j.cnki.jsufe.2020.04.006
Zhang, Y., Chen, Y., Zhang, R., Tu, W., &, Zhao, Y. (2024a). Outward foreign direct investment productivity along the belt and road. Economics & Politics, 36(2), 959–988. https://doi.org/10.1111/ecpo.12278
Zhang, Y., Zhang, Z., Jin, H., Tu, W., & Liu, Y. (2024b). Innovation and OFDI along the Belt and Road. Technological Forecasting and Social Change, 200(1), Article 123136. https://doi.org/10.1016/j.techfore.2023.123136
Zhou, C., & Liu, X. (2017). Business environment and China’s outward foreign direct investment: From the perspective of investment motivation. International Trade Issues, (10), 143–152. https://doi.org/10.13510/j.cnki.jit.2017.10.013