Economic Policy Uncertainty, Bilateral Investment Treaties, and Chinese Outward Foreign Direct Investment

This paper examines the effect of bilateral investment treaties (BITs) in promoting Chinese outward foreign direct investment (COFDI) in the presence of rising economic policy uncertainty in China's partner countries. We postulate that the signing of BITs should help stimulate COFDI because the treaties send a credible signal to foreign investors about the host country's intent to protect Chinese investment, and make it more difficult for the host country to violate its treaty obligations. BITs that contain rigorous investment protection and liberalization provisions, in particular, should be more likely to encourage COFDI as they directly influence Chinese investors' expectations about the stability, predictability, and security of the host market. However, while BITs generally promote COFDI, host country economic policy uncertainty may also limit their effectiveness. This is because uncertainty tends to undermine investor confidence, trigger capital flows from high- to low-risk countries, and dampen commercial activities. Poisson pseudo-maximum likelihood (PPML) estimation models of the determinants of COFDI to 188 countries between 2003 and 2017 lend substantial support to our conjectures

Bilateral investment treaty · Business · Capital (architecture) · China · Economics · Foreign direct investment · International economics · International investment · International trade · Investment (military) · Liberalization · Macroeconomics · Market economy · Monetary economics · Political science · Politics · Predictability · Treaty · Innovation Policy and RD · International Business and FDI · Law · Market Dynamics and Volatility

• Chinese Firms in the US–China Trade War

  Open Access•Ka Zeng, Soo Yeon Kim•International Studies Quarterly•2024

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