The Impact of Infrastructure Quality on China’s OFDI: A Study Based on RCEP Partners

Abstract

Infrastructure plays a crucial role in facilitating economic development and attracting foreign direct investment (FDI) in a country. With the implementation of the Regional Comprehensive Economic Partnership (RCEP) Agreement, trade and investment ties between China and its RCEP partners have been further strengthened. This study investigates the influence of host country infrastructure development on China’s outward FDI (OFDI) within RCEP partners. By analyzing China’s OFDI to RCEP partners and the infrastructure characteristics of member countries, we explore the impact of host country infrastructure quality on China’s OFDI. Using panel data on China’s direct investment stock in 12 RCEP countries from 2008 to 2020, in conjunction with host country infrastructure quality indicators, we apply a fixed-effect regression model to examine the effects of different types of infrastructure quality on China’s OFDI. Our results reveal that transportation, communications, and energy infrastructure in host countries significantly promote Chinese OFDI. Furthermore, we find that a larger market size, population, and higher trade openness in the host country effectively attract FDI from China. Based on these empirical findings, we provide recommendations to optimize the capital flow and enhance the efficiency of China’s OFDI.