Working Paper: NBER ID: w21089
Authors: Joshua Aizenman; Yothin Jinjarak; Huanhuan Zheng
Abstract: The Global Financial Crisis (GFC) brought to the fore the limits of the Chinese export led-growth strategy and the need for Chinese rebalancing of its international business approaches. Our paper takes stock of what may be the new chapter of Chinese outward-mercantilism, which aims at securing a higher rate of returns on its net foreign asset position, leveraging its success in manufacturing exports, natural resource imports and RMB internationalization. Using micro-level project data and macroeconomic covariates, we find positive association of Chinese trade and financial flows with China’s outward direct investment (ODI). The relationship is stronger for ODI originated from the Chinese state-owned enterprises, and strengthened by the provision of RMB swap-line agreements with China’s trading partners. The evidences support the conjecture that Chinese ODI is bundled to trade and financial linkages with its investment and trading partners.
Keywords: Chinese Outward Direct Investment; Trade Linkages; RMB Swap Lines; Bundling Strategy; Emerging Markets
JEL Codes: F40; F21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Chinese trade flows (F14) | Outward Direct Investment (ODI) (F23) |
| Chinese state-owned enterprises (SOEs) (L32) | Bundling effect with trade and finance (F12) |
| Private enterprises (POEs) (L32) | Bundling effect with trade and finance (F12) |
| Commodity imports (F10) | Outward Direct Investment (ODI) (F23) |
| RMB swap lines (F33) | Positive association between ODI and commodity imports (F10) |