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img_publication Working Paper

China’s ODI: How much goes where after round-tripping and offshoring?

Document Number 15/17

By , ,

In this paper we recalculate China’s Outbound Foreign Direct Investments (ODI) in a way which accounts for round-tripping and offshoring. Our estimates show that China’s ODI flows and stocks may have been overestimated and may be more diversified that previously thought.


Abstract

Chinese official statistics may be distorted by the presence of stop-over destinations such as Hong Kong and offshore centers in the Caribbean. In this paper we recalculate these flows in a way which accounts for these distortions, estimating the actual magnitude and distribution of China’s ODI and flows and stocks based on weighted averages. Our estimates show that Chinese ODI flows in 2013 may have been overstated due to the presence of round-tripping, dislodging previously held assumptions that the country is close to becoming a net exporter of FDI. Furthermore, the distribution of China’s ODI may be more diversified than previously thought, with developed markets such as Europe and North America featuring more prominently. Finally, Chinese ODI is a relatively new phenomenon, so its global stock, not including valuations, remains small when compared to other major economies (China 2.3%, Japan 4.5%, US 22%). This is bound to change rapidly following from a number of policy initiatives that aim to assist China to rebalance its economy and internationalize its companies.

 

 

Keywords: Chinese outward foreign direct investment, round-tripping, offshoring

JEL Codes: F21, F23

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