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Asia Pacific Journal of Management

, Volume 35, Issue 1, pp 11–37 | Cite as

Exploring China’s state-led FDI model: Evidence from the extractive sectors in Latin America

  • Daniel M. Shapiro
  • Carlos Vecino
  • Jing Li
Perspectives

Abstract

Our study explores an under-examined way in which the Chinese government supports outward foreign direct investment (OFDI): state supported development loans to host countries. Through such loans, the Chinese government develops commercial and diplomatic relationships with host countries, which in turn facilitate Chinese firms’ access to natural resources while at the same time limiting their exposure to host country political risk. We provide evidence in Latin America that although Chinese OFDI occurs in countries where government-related political risk is high, Chinese firms are less likely to be involved in public disputes with the host government. However, they are more likely to engage in conflicts with nongovernment stakeholders. Thus, while the Chinese government may assist in obtaining a political or legal license to operate, Chinese firms appear to have more difficulty obtaining a social license to operate, suggesting that the Chinese model has limits, notably with respect to mitigating social risks.

Keywords

Outward FDI Emerging markets Natural resources Extractives China Latin America Political risk 

Notes

Acknowledgements

We thank Mike Peng (Consulting Editor) and two anonymous reviewers for their insightful comments and suggestions. Earlier versions of this paper were presented at Copenhagen Business School, Center for Emerging Markets at Northeastern University, and the Jack Austin Centre for Asia-Pacific Business Studies at Simon Fraser University. We acknowledge with gratitude the comments of Ilan Alon, Alvaro Cuervo-Cazurra, and Ravi Ramamurti. We are grateful for funding support from the Canada Research Chairs program, the Social Sciences and Humanities Research Council of Canada, and the Jack Austin Centre for Asia-Pacific Business Studies at Simon Fraser University.

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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.Beedie School of BusinessSimon Fraser UniversityBurnabyCanada
  2. 2.Escuela de Estudios Industriales y EmpresarialesUniversidad Industrial de SantanderBucaramangaColombia
  3. 3.Beedie School of BusinessSimon Fraser UniversityBurnabyCanada

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