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Professor Kelan Lu's book, "Where FDI Goes in Decentralized Authoritarian Countries: The Politics of Taiwanese Site Selection for Investment in Mainland China," examines the determinants of foreign direct investment (FDI) in China, with a focus on local governments' fiscal autonomy. Lu argues that fiscal decentralization, local officials' political incentives, and their interactions with FDI agglomerations are key factors in understanding FDI inflows in China and its distribution across counties. The book also explores the case of Taiwanese FDI, highlighting the importance of local governments' fiscal autonomy in attracting investment from countries with adversarial relationships. Empirical tests support Lu's arguments, and the book provides valuable insights into the role of decentralization and political incentives in FDI. [Extracted from the article]

Foreign infrastructure investment (FII) is essential to the economic growth of developing countries. However, developing countries are prone to higher levels of political risk, which act as detractors to such investment. The nature of political risk has been well documented and includes such factors as corruption, inadequate legal protections, opaque regulatory processes, and unstable governments prone to volatile shifts in project support. Even so, the impact of political risk on FII does not arise from environmental factors alone, but also emanates from the internal attributes of the infrastructure delivery system; which is to say not all projects are impacted to the same extent by a given political climate. Although the external political risk environment has been extensively explored, the internal vulnerabilities are not well understood. This study identifies the impacts of foreign infrastructure vulnerability on FII and its mediating capacity in offsetting the adverse effects of political risk on FII in developing countries. It draws on a database of China and Brazil from 2006 to 2019, as exemplars of developing nations. A partial least-square structural equation model (PLS-SEM) method is employed in analyzing the database against existing system vulnerability factors as identified: political risk exposure of the system, system's capability of dealing with political risk, and the relationship between host and home countries. The findings confirm that, ceteris paribus, FII flows are hindered when infrastructure projects carry higher risk exposure. Moreover, where systems possess the capacity to mediate political risk, FII participation is facilitated, while also diluting the negative impacts of that risk on the delivery system. These findings add to the body of knowledge in the domain of vulnerability theory, while offering a practical political risk management pathway for multination investors. [ABSTRACT FROM AUTHOR]

Using a sample of 124 countries assisted by China from 2000 to 2019, this paper examines the impact of foreign aid on outward foreign direct investment (OFDI) and the mitigation mechanism of risk. The research finds that, first, foreign aid can significantly reduce the country risk of recipient countries, especially political risk and financial risk, and thus play a role in promoting the inflow of OFDI of donor countries, and there is a lagged effect of this role; Second, foreign aid from other countries has a negative impact on China's OFDI to recipient countries, indicating that foreign aid is nonaltruistic and exclusive; Third, the mitigation effect of foreign aid on country risk is achieved through five channels: compensation effect, synergistic effect, pioneer effect, assimilation effect, and redistribution effects. [ABSTRACT FROM AUTHOR]

Unlike most previous studies focused on the impact of domestic risk on firms' innovation activities, this research places more effort on identifying whether and how geopolitical risk affected corporate innovation behavior in China over the period 2003–2019. By constructing firm-level panel data that combine financial information with data on geopolitical risk and patenting activity, we find that geopolitical risk exerts a negative impact on firms' innovation activity through increased external financing costs and by reducing firms' willingness to raise capital. This inhibitory effect is more pronounced for companies with high innovation capability, export-oriented firms, and firms facing higher macro-risk exposure. In addition, political connection can alleviate these restricting effects of geopolitical risk on firm innovation. Knowledge of these impacts should help firm managers, government, and policymakers to develop more efficient development strategies and mitigate the impact of such risk on corporate operations. [ABSTRACT FROM AUTHOR]

This study provides fresh evidence regarding the dynamic association that is believed to exist in relation to green finance (GF), economic growth (GDP), political risk (PR), economic risk (ER), and carbon dioxide (CO2) emissions. It therefore uses the dataset pertaining to China from most recent time-series – covering the period spanning from the years of 1990 to 2020, by employing the Morlet Wavelet Analysis technique. The empirical findings of the wavelet power spectrum reveal that green finance GF and ER are vulnerable in the short- and long-run, and the short-run, respectively. At the same time, no vulnerability has been observed in the GDP, PR, and CO2 emissions. In addition to this, the wavelet coherence also reveals the bidirectional causal association that exists between GF-CO2 and ER-CO2, but only in the short run. It must also be taken into consideration that the causal influence of CO2 is deemed to be greater than the GF and ER, respectively. Besides this, a bidirectional causal nexus also exists between the GDP and CO2 emissions, only in the long run. Furthermore, the association between the economic growths follows both the phase and antiphase associations. Moreover, the study also reveals that there is no significant causal link between the PR and CO2 emissions. The results emphasize that the significance of green finance investment will tend to increase with strict policy implications, stabilization or minimization of economic risk and political risk. The same will also take place while promoting environmentally friendly production via economic growth, so as to reduce CO2 emission in the region taken into account. [ABSTRACT FROM AUTHOR]

Over the past decade, there has been an extremely rapid increase in bilaterally financed infrastructure projects globally, as part of China's Belt and Road Initiative (BRI). The BRI is a broad initiative involving many Chinese state-owned enterprises to develop transport and other infrastructure across the developing world, with bilateral financing from either the China Development Bank (CDB) or the China Export–Import Bank (CEXIM). More recently, many large BRI projects have undergone renegotiations with borrower nations or caused financial distress. This provides a useful opportunity to evaluate the BRI through the lens of the obsolescing bargain model. The obsolescing bargain has historically been used to describe the relationship between multinational corporations (MNCs) and the developing countries they invest in. For large capital investments paid off over a long operating period, such as infrastructure projects, the obsolescing bargain describes a shift in leverage from MNCs to the host nation once the capital investment is complete, often leading to renegotiation or even expropriation. This study examines the BRI through the lens of the obsolescing bargain to evaluate the practices of China's state-owned enterprises (SOEs) and policy banks in mitigating political risk. [ABSTRACT FROM AUTHOR]

Coal is an irreplaceable part of the world energy structure and the condition will not be changed in the near future. Under the Belt and Road initiative, more and more Chinese energy enterprises are planning to invest in coal-fired power plant (CFPP) abroad. However, there are multiple potential risks in investing in CFPP overseas. So, assessing the risk level can help the investors avoid too risky countries and at the same time facilitate the government to take measures to reduce the potential risks to attract more investors. To reasonably assess overseas investment risk of CFPP in countries along the Belt and Road initiative, this paper establishes an evaluation criteria system from eight dimensions which consists of a total of 39 criteria. Then, these criteria weights are determined through a combined analytic network process-Entropy method. Furthermore, considering the psychological characteristics of decision-makers, a TODIM (an acronym in Portuguese for Interactive Multi-criteria Decision Making) approach is used to rank the overall risk level of CFPP investment for 23 nations. The findings indicate that the criterion of economic foundation owns the largest weight. Moreover, among these evaluated nations, Singapore have the lowest risk for China's CFPP investment, followed by New Zealand and Thailand. • Coal-fired power plant investment risk assessment along the "Belt & Road Initiative" is evaluated. • An evaluation criteria system including 39 criteria from eight dimensions is established. • Criteria weights are determined through a combined ANP-Entropy method. • TODIM approach is used to rank the overall risk level for 23 nations. • Singapore New Zealand and Thailand are the ideal investment choices. [ABSTRACT FROM AUTHOR]

We examine the role of political environment (PE) in determining Chinese multinational corporations' (MNCs) investment decisions considering the RenMinBi (RMB) exchange rate (ER) movement. System generalized method of moments, feasible generalized least squares, and fixed effect estimations are employed to conduct a panel data analysis of 92 countries for the period of 2003-2015. Our empirical results reveal that Chinese outward foreign direct investment (OFDI) responds negatively to ER risk and political risks individually. After introducing the joint effect of PE and ER movement, the results suggest that Chinese OFDI's risk preference to PE is reversed when RMB is appreciating. We argue that Chinese firms are still risk-avert when considering investing abroad. The empirical result shed light on better understating of Chinese OFDI patterns and motivations. [ABSTRACT FROM AUTHOR]

The article discusses the impact of the demonstration in China's Tiananmen Square in 1989 on foreign business in the region. The global confidence in China has eroded due in part to the actions of the Chinese government. A number of foreign investors are adopting a wait and see attitude with China. Experts speculate that the Chinese government will likely push internally for more discipline in the approach of Chinese executives to working with foreign investors. They say there will be more careful deliberation before a Chinese firm enters into business with a foreign counterpart.

This article examines U.S. joint ventures in the People's Republic of China. It focuses on the motives for these joint ventures and the American investors' assessment and management of political risk. Information was collected in interviews with management personnel from eleven U.S. firms which had made direct investments in China by the fall of 1983. There are some significant differences for U.S. direct investments in China as contrasted to those in other countries, which have important implications for the establishment of future U.S. joint ventures in China. [ABSTRACT FROM AUTHOR]

Our study explores an under-examined way in which the Chinese government supports outward foreign direct investment (OFDI): state supported development loans to host countries. Through such loans, the Chinese government develops commercial and diplomatic relationships with host countries, which in turn facilitate Chinese firms’ access to natural resources while at the same time limiting their exposure to host country political risk. We provide evidence in Latin America that although Chinese OFDI occurs in countries where government-related political risk is high, Chinese firms are less likely to be involved in public disputes with the host government. However, they are more likely to engage in conflicts with nongovernment stakeholders. Thus, while the Chinese government may assist in obtaining a political or legal license to operate, Chinese firms appear to have more difficulty obtaining a social license to operate, suggesting that the Chinese model has limits, notably with respect to mitigating social risks. [ABSTRACT FROM AUTHOR]

According to conventional wisdom, capital flows are fickle. Focusing on emerging markets, we ask whether this conventional wisdom still holds in our contemporary world. Our results show that, despite recent structural and regulatory changes, much of it survives. Foreign direct investment (FDI) inflows are more stable than non-FDI inflows. Within non-FDI inflows, portfolio debt and bank-intermediated flows remain the most volatile. Whereas FDI inflows are driven mainly by pull factors, portfolio debt and equity are driven mainly by push factors; bank-intermediated flows are driven a combination of push and pull factors. Capital outflows from emerging markets behave differently, however. FDI outflows from emerging markets have grown and become significantly more volatile. There is similarly an increase in the volatility of bank-intermediated capital outflows from emerging markets. Our findings underscore that outflows from emerging markets, both FDI and bank-related flows, have come to play a growing role and warrant greater attention from analysts and policymakers. [ABSTRACT FROM AUTHOR]

Using provincial data from China between 2002 and 2011, we find substantial evidence indicating a positive association between the growth of bank loans issued by commercial banks and the political pressures faced by provincial leaders. This association is particularly true for state-owned banks, which are much more politically pressurized than others, but is relatively attenuated in provinces with a more developed banking sector. We also find that bank loans issued under greater political pressures are less commercially oriented and have lower quality. Our findings are robust to a variety of sensitivity analyses and alternative measures of political pressure. Overall, our study contribute to a growing literature emphasizing the role of the political incentives of government officials in fuelling economic growth through credit allocation. [ABSTRACT FROM AUTHOR]

Political risk can be defined as the potential for uncertainty and harm to business/economic operations that arise from political (governmental and other) behavior and events. These risks typically stem from factors such as economic structures, government institutions, policies, and societal characteristics, and are becoming more of a concern to prospective investors in a changing global political economy. This article seeks to expand upon the framework of political risk analysis by looking at 'softer,' nonquantifiable risk factors. Through the analysis of foreign business experiences in China, we aim to demonstrate, via a qualitative case study of foreign direct investment (FDI) in the Chinese mining sector, that in addition to typical financial, operational, and geological factors, firms should be better aware of the particular sociopolitical and cultural risks that can harm their investments in a given industry. This study draws on primary fieldwork, focuses on micropolitical risks to the industry, and stresses that multinational corporations (MNCs) could be more cognizant of the many societal factors that can influence an investment success. © 2016 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR]

Research summary: We examine the relationship between the geographic concentration of a firm's sales and the firm's vulnerability to expropriation hazards. Although expanding outside the home location can initially increase a firm's exposure to government expropriation, we find that this effect reverses when a firm's sales outside its home location have reached a point at which it has sufficient resources to better influence government actions and to pose a credible threat to exit the market in which it is being targeted. We supplement this main result by identifying two moderating factors: the firm's level of political capital and the effectiveness of institutional constraints on government behavior. We find support for these hypotheses from survey data on privately owned enterprises in China. Managerial summary: This research advises firm managers that certain market activities might knock their firms' economic interests out of alignment with the government's political interests, and thus, influence the political hazards they face, particularly in emerging markets such as China, which has attracted strong interest of many firms with respect to entering the market. Here, all else being equal, the firms' geographic concentration exposes them to different levels of state expropriation-but not in a simple linear fashion as suggested by the conventional wisdom of local protectionism or that of the bargaining advantage generated by the threat of relocation: Those who are 'stuck in the middle' ended up paying twice or even three times as much unauthorized levies as the purely local or the most expansive firms. Copyright © 2015 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Traditional political risk theories often focus on a developing host country government's ability to intervene in the activities of foreign multinationals in the extractive or infrastructure sectors. This results in inadequate understanding of (1) how a government's motivation to intervene is influenced by the broader societal context, (2) the importance of multinationals' political risk at home, and (3) the increasing political risk faced by high-tech and service firms. We argue that there is a need to update the bargaining power and political institutions theories and further develop a legitimacy-based view of political risk. Then, we examine the political risk experienced by Google and Yahoo at home and abroad due to their activities in China to illustrate the benefits of a holistic approach to political risk. Copyright © 2015 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This article employs a spatial econometric model to examine whether China’s exports are affected by political risk, economic integration, and spatial effects. The results show that as China’s economy has grown, a home market effect is evident for its exports. A higher level of economic integration is beneficial to China’s exports. A substitutive relationship is discovered between China’s OFDI and exports. In addition, the higher income per capita of partner countries and the high degree of economic openness are both beneficial to China’s exports. The partner countries of China, with their higher values of export trade, have been mostly countries with lower political risk. [ABSTRACT FROM PUBLISHER]

In the past few years, China has experienced a rapid development of foreign direct investment (FDI) in the Association of Southeast Asian Nations (ASEAN.) In particular, the formation of CAFTA (the China--ASEAN Free Trade Area) will greatly encourage Chinese multinational corporations to "go out" and invest in ASEAN. However, the South China Sea disputes between China and several ASEAN countries have increased the political risks of China's FDI in ASEAN. This paper starts with an analysis of the political risks of China's FDI in ASEAN against the background of the South China Sea disputes, explains how to view and assess these political risks, and then comes up with a systematic and comprehensive mechanism for coping with the political risks of China's FDI in ASEAN against the background of the South China Sea disputes. [ABSTRACT FROM AUTHOR]