What question did this study set out to answer?

The aim is to understand how Chinese firms alter their outward investment strategies based on geopolitical and institutional factors amidst geoeconomic fragmentation.

May 10, 2026Journal of Chinese Economic and Foreign Trade Studies

Geoeconomic fragmentation and China’s outward investment: the interplay of ownership, institutions and politics

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ZCZhidan CaiXiamen University JYJie YangGeneral Cardiology

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Implication

Examines how geopolitical alignment and institutional quality affect Chinese firms' investment choices, indicating complex dynamics in a fragmented global economy.

Key Points

The aim is to understand how Chinese firms alter their outward investment strategies based on geopolitical and institutional factors amidst geoeconomic fragmentation.
Analyzed OFDI transactions from 939 Chinese listed firms across 101 countries from 2008 to 2022.
Developed a firm-year two-way fixed-effects model and utilized instrumental-variable regressions to address endogeneity.
Classified host economies by geopolitical alignment, using rule-of-law indices to proxy institutional quality.
In neutral countries, private firms prefer investments in places with strong rule of law (higher institutional quality), while state-owned enterprises favor weaker institutions for strategic advantages.
In friend-shoring countries, institutional quality does not significantly influence OFDI for either ownership group.
Political embeddedness enhances private firms' inclination towards high-quality institutions, while SOEs remain tolerant of weaker institutions, but geopolitical factors limit investment options.

Cite This Study

Cai et al. (2026) studied this question.

synapsesocial.com/papers/6a002191c8f74e3340f9c8a5 https://doi.org/10.1108/jcefts-11-2025-0139

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Implication

Examines how geopolitical alignment and institutional quality affect Chinese firms' investment choices, indicating complex dynamics in a fragmented global economy.

Geoeconomic fragmentation and China’s outward investment: the interplay of ownership, institutions and politics

Discussion

Member takes

Implication

Key Points

Cite This Study

Geoeconomic fragmentation and China’s outward investment: the interplay of ownership, institutions and politics

Discussion

Member takes

Implication

Key Points

Cite This Study

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