Chinese Foreign Direct Investment in CEE: The Underlying Patterns and Motives

Martina Misutova

Student thesis: Master thesis


Chinese investment in the countries of Central and Eastern Europe (CEE) has been increasing ever since the One Belt, One Road (OBOR) strategy was introduced. With the increasing interest of Chinese investors in the CEE region, it is important to understand the patterns and the underlying motives of Chinese investment in the CEE countries. Thus, the main purpose of this thesis was to find the location determinants of Chinese FDI in the countries of Central and Eastern Europe and to describe the investment patterns and characteristics of Chinese companies investing in this region. Set of economic and institutional variables was employed on a firm-level dataset to find the determinants of Chinese FDI in 16 CEE countries during 2006-2017 using Negative binomial regression analysis. The results indicate that Chinese OFDI into CEE countries is associated with the volume of Chinese exports, market size, strategic-assets, good infrastructure and the cultural proximity to the host countries (in all countries and EU-members) and high political risk in the host countries (EU-members). The institutional variables control of corruption and economic freedom weren’t found to be related to Chinese OFDI into CEE countries. To characterize Chinese investments in the CEE, a cluster analysis was performed which has identified two distinct types and two subtypes of Chinese investments. First main type of Chinese investments is characterized by small companies, usually service POEs without any previous international experience that enter market through M&A and form JVs with the local partners in the EU-member countries. The second main type of Chinese investments is characterized by large SOEs that tend to invest in the primary and secondary sector in the non-EU countries. These firms are large, make large investments are more likely to have previous international experience and tend to choose high equity modes and GI to enter the market.

EducationsMSc in Business, Language and Culture - Business and Development Studies, (Graduate Programme) Final Thesis
Publication date2018
Number of pages105
SupervisorsPeter Gammeltoft