The Impact of Chinese Outward FDI on Regional Production Networks and Development in ASEAN
This project aimed at analysing foreign direct investment (FDI) from emerging countries and the effects on host countries. For this purpose the research project focuses on China’s FDI in the member countries of the Association of Southeast Asian Nations (ASEAN). Based on a profile description of the profile of Chinese outward FDI in the countries of investigation, direct and indirect effects on local labour and firms were examined as well as the impact of China’s outward FDI on regional production networks in East Asia.
Project Lead:
Peter Wolff
Project Team:
Julia Kubny (Associate Fellow)
Financing:
Federal Ministry for Economic Cooperation and Development (BMZ)
Time frame:
2007 - 2011
/
completed
Co-operation Partner:
Centre for International Business, University of Leeds, UK
Central Institute for Economic Management (CIEM), Hanoi, Vietnam
Institute for Southeast Asian Studies (ISEAS), Singapore
Hem Socheth, Independent Research Consultant, Phnom Penh, Cambodia
Project description
Component of the overall project "Anchor Countries as Drivers of Regional Economic Integration"
The recent increase in foreign direct investment (FDI) from emerging economies such as China suggests a closer look at the specific characteristics of South-South FDI flows and their effects on host countries. The research project focuses on China’s outward FDI in the member countries of the Association of Southeast Asian Nations (ASEAN), and particularly in Cambodia and Vietnam.
Besides describing the profile of Chinese outward FDI in ASEAN, the project mainly investigated various direct and indirect effects on local labour and local firms. Will the distinct features of mainland Chinese FDI in ASEAN, like cultural and geographic proximity or the smaller technology gap, entail deeper integration into the local and regional economy? Will this translate into improved development prospects for host countries? Do Chinese-owned firms encounter difficulties that may impede further integration? What recommendations for policymakers can be derived?
A second focus of the research project was on the impact of China’s intraregional outward FDI on regional production networks in East Asia. Does China’s OFDI have a significant influence on the pattern of regional production networks in East Asia? Will China be the next country to move from the group of assembly countries to the group of producers of (high-technology) intermediate goods, thereby relocating low-skilled production processes to the remaining less advanced ASEAN member countries? Or is China’s intraregional OFDI rather of a horizontal and market-seeking nature, thus at most creating a local production network? What would this imply for the less advanced ASEAN member countries, respectively?
The above questions were examined quantitatively and qualitatively based on empirical research conducted in Cambodia, China, Singapore, Thailand, and Vietnam (including firm surveys in Cambodia and Vietnam).
The project was related to the overarching project Anchor Countries as Drivers of Regional Economic Integration by taking up two of its main themes. Firstly, it analysed the role of China in the East Asian regional integration process by studying the impact of its outward FDI on regional production networks. Secondly, it looked at the impact of (de facto) regional economic integration on development by investigating the effects of China’s intraregional FDI on host country firms and labour.