The economic determinants of Chinese foreign direct investment in Egypt
| DOI | https://doi.org/10.1108/JCEFTS-02-2015-0008 |
| Date | 02 February 2015 |
| Pages | 20-26 |
| Published date | 02 February 2015 |
| Author | Hany M Elshamy |
| Subject Matter | Economics,International economics |
The economic determinants of
Chinese foreign direct
investment in Egypt
Hany M. Elshamy
Tanta University, Tanta, Egypt
Abstract
Purpose – This paper aims to investigate the determinants of foreign direct investment (FDI) by
Chinese multinational enterprises (MNEs) over the period 1985-2011.
Design/methodology/approach – This paper estimates a single equation model which uses
long-run co-integration analysis and short-run analysis (error correction mechanism). This paper
depends on annual data collected from the World Bank and the General Authority for Investment &
Free zones Information & Decision Support Division for the period 1985-2011.
Findings – This paper found a conventional result for market size. The author infers from the
signicant role played by Egyptian natural resource endowments that the institutional
environment has strongly shaped Chinese FDI, leading to signicant natural resources-seeking
FDI. The author also nds that policy liberalisation in China has had a positive inuence in
stimulating Chinese FDI in Egypt.
Originality/value – Despite this model being used to estimate the determinants of FDI by Chinese
MNEs in several countries, this is the rst time it is being used in Egypt using a time-series analysis.
Moreover, this model which has been used in this paper uses both long-run and short-run analyses.
Keywords Egypt, Foreign direct investment (FDI), Chinese multinational rms
Paper type Research paper
1. Introduction
Foreign direct investment (FDI) is investment by a multinational corporation (MNC) based in
a “source” country in a subsidiary or afliate located in a foreign “host” country.
FDI, as a key element of globalisation and of the world economy, is a driver of
employment, technological progress and productivity growth. It plays an important role
of lling the development, foreign exchange, investment and tax revenue gaps in
developing countries (Anyanwu, 2012).
By the end of the twentieth century, FDI had effectively replaced trade as a driver of
economic growth in less developed and emerging economies. In 2002, there were an
estimated 65,000 MNCs with about 850,000 worldwide afliates employing about 54 million
employees, a rise of 141 per cent over the 1990 employment gure for MNCs (UNCTAD,
2002). Over the same period, the stock of outward FDI increased from $1 trillion to $6.6
trillion, and MNCs accounted for about 10 per cent of the world’s gross domestic product
(GDP) and about 33 per cent of the world’s exports (Bhaumik and Gelb, 2005).
The proportion of the capital formation for developing countries which were nanced
by FDI rose from 4.7 per cent in 1970 to 13.8 per cent in 2006 (Forsyth et al., 2009).
JEL classication – F21, F2
The current issue and full text archive of this journal is available on Emerald Insight at:
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JCEFTS
8,1
20
Journalof Chinese Economic and
ForeignTrade Studies
Vol.8 No. 1, 2015
pp.20-26
©Emerald Group Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-02-2015-0008
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