Foreign Direct Investment (FDI) and Territorial Disputes between Adversarial States: Implications for Tsai Ing-wen’s “New Southbound Policy” and Taiwan’s Approach to Territorial Disputes in the South China Sea

  • Kelan (Lilly) LuEmail author
Research Article


This study examines whether the pacifying effect of foreign direct investment (FDI) on territorial disputes between adversarial dyads is conditional upon the dyads’ past experience of military cooperation. I built a political economy model and conducted a logistic regression analysis on the newly coded bilateral FDI data between adversarial dyads and the existing dataset by merging the rivalry data established by Thompson [51] and the territorial disputes data collected by Lee and Mitchell [42]. I found that when bilateral FDI flows between adversarial dyads reach a certain level the pacifying effect of FDI is stronger for adversarial dyads with past military cooperation. I also found that while past military cooperation has a pacifying effect in general, past military cooperation that occurred more recently has a stronger pacifying effect than those that occurred a while ago. Moreover, based upon the theoretical model and empirical findings in this paper, I investigated the political implications for Tsai Ing-wen’s “New Southbound Policy” and Taiwan’s approach to the territorial dispute issues in the South China Sea.


Adversarial states Territorial disputes Foreign direct investment Military cooperation Taiwan and the South China Sea 


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Copyright information

© Journal of Chinese Political Science/Association of Chinese Political Studies 2019

Authors and Affiliations

  1. 1.Department of Political ScienceUniversity of South CarolinaColumbiaUSA

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