Chinese Outbound Direct Investment in Sri Lanka, India and Pakistan: Some Emerging Facts

Abstract

During last decade, Chinese Outbound Direct Investment (ODI) in Sri Lanka, India and Pakistan (SLIP) has shown its strong growth tendency more than its average expansion rate in whole Asia. Despite Pakistan is still facing higher political risks issues, Chinese ODI has maintained its highlighted performance in the country; whilst, India as the most favourable ODI destination in South Asia, Chinese ODI activities yet seem to be lukewarm. Therefore, this study is to investigate the key factors that are pushing the proliferation of Chinese ODI in SLIP countries. The combination of OLI paradigm and institutional approach has been applied as the theoretical framework which OLI paradigm is focusing on firm specific advantages and host country specific factors, whilst institutional approach emphasises on business strategy which is based on interactivities of firms, organizations and institutions. This study reviews previous studies on Chinese investment in countries of South Asia (SLIP countries in particular) as well as applies secondary data with descriptive research method to investigate the emerging facts of the proliferation of Chinese ODI in these countries. From the systematic discussion on firm specific advantages, host country factors, home country factors and other policy related factors four key ODI elements, the finding shows that Chinese ODI in SLIP countries is not merely motivated by traditional firm specific advantages, but Chinese firms has also taken the advantages of strong support from home country to implement Chinese long term economic strategies.