SEMINARIOS

HOW CAN CHINA INVEST IN COUNTRIES WHERE OTHERS ARE EXPROPRIATED?

El Profesor Pedro Hidalgo, Director del Departamento de Administración y Negocios de la Facultad de Economía y Negocios de la Universidad de Chile, los invita a participar de nuestro ciclo mensual de Seminarios. En esta oportunidad el tema a conversar estará enfocado en “How can China invest in Countries where others are Expropriated?" y lo dictará el profesor Rodrigo Wagner, académico de nuestro departamento, quien es PhD, M.A. y MPA, Harvard University, Magister en Agro-recursos, Ingeniero Agrónomo y Licenciado Agro-recursos, Pontificia Universidad Católica de Chile.

Este Seminario se llevará a cabo el día miércoles 2 de octubre 2013 a las 13:00 hrs. en Diagonal Paraguay 257, Piso 10, Sala 1002, Torre 26, Santiago.

Les comparto un resumen de las principales ideas del Seminario de Rodrigo:

Rodrigo Wagner

“Poor rule of law is usually a binding constraint for foreign investment and lending. But recently Chinese firms disproportionally invest overseas in countries with weak institutions. How do they manage this exposure? Our model appeals to China’s buying power as importer and also to its within-country coordination to act like a single agent. These two factors allow China to credibly commit to sizable trade sanctions in case the host country expropriates. Thus, purchasing power is used to sustain other investments, analogous to trade-credit between a small firm and its main buyer. This additional “stick” becomes more important for FDI in non-traded goods, which face weaker enforcement of compensations post expropriation or devaluations. Using data on outward Chinese FDI (2003-2007) we find support for our model. First, China shows revealed comparative advantage as investor in countries with both poor institutions and a large share of exports going to China. In contrast, simply having poor institutions is not a robust predictor of the Chinese share of FDI, suggesting that the interaction with oligopsonistic power plays a role. Second, we find that the effect is concentrated in non-traded goods; giving also less traction to explanations in which multinationals prefer to own the assets producing the exported good (e.g. Antrás, 2003). Third is the intensive margin, with Chinese projects being 50% bigger in size than those of other countries in the same destination. Overall, our results suggest an additional channel in which Chinese growth would expand capital flows to developing nations.


JEL classification: F21, F23, F34, F51, G32 , G33.


Key words: Foreign Direct Investment, Sovereign Debt, Sanctions, Non-Market Strategy.".

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