China: An International Journal(SSCI), 2018, Volume 16, Number 1

Authors: Lu Yue, Lu Yunlong, Zeng Ka, Li Yadong

Abstract: This article analyses the impact of China's outward foreign direct investment (OFDI) to 48 "One Belt, One Road" (OBOR) countries on the extensive and intensive margins of trade using Chinese OFDI data from 2004 to 2014. The study yields the following key findings. First, Chinese OFDI exerts a trade creation instead of a trade substitution effect on total export volumes. Second, in terms of the technological sophistication of exports, Chinese OFDI has a notable effect in boosting exports with low or medium levels of technological content. Finally, there is no strong evidence that Chinese OFDI significantly expands the number of export product categories. These findings imply that the trade creation effect of Chinese OFDI derives mainly from increases in the intensive rather than the extensive margin of trade.