What Drives Chinese Firms Presence in Latin America? An Empirical Analysis of Chinese Foreign Direct Investment in Latin America

Abstract

Chinese Foreign Direct Investment in Latin America has grown significantly in recent years, posing some concerns on the political implications of an increased Chinese presence in the region. Several empirical studies have added to the understanding of what determines the locational determinant of Chinese investment, including natural resource endowments and large markets. But so far, these studies have ignored the geopolitical dimension that influences investment decision-making. This thesis examines the implications of the rise of China as a global economic power and the emergence of a bipolar Sino-American world on Chinese investment trends. Utilizing a time-series data of 14 countries over the period 2005-2018, this thesis investigates the effects of several political and economic variables on attracting Chinese capital. This research unveils that investment is attracted to Latin American countries with weaker perceived liberal democracies, providing evidence to the hypothesis of FDI as an essential part of China’s economic statecraft abroad.