Location choices of Chinese enterprises in Southeast Asia: The role of overseas Chinese networks

doi:10.1007/s11442-019-1666-2

Abstract

Abstract:

With the implementation of the “Going out” strategy and the Belt and Road Initiative, China’s investments have become increasingly influential in the global market. The contemporary literature has revealed how overseas Chinese networks and communities have actively promoted foreign investments into China over the past four decades. Whether this factor can help Chinese capital flow out once again is still ambiguous. This study examines this question by investigating Chinese corporate investments in Southeast Asia from 2001 to 2016. Through the discrete-selection logistic regression model, the study analyzes the correlation between overseas Chinese social networks and the location choices of Chinese corporate investments. The results show the following: (1) overall, there is a significant positive correlation between the population of overseas Chinese in Southeast Asian countries and the location choices of Chinese corporate investments; (2) in terms of the time sequence, the significance of the correlation is increasing, which implies that overseas Chinese have positive impacts on promoting the location choice of Chinese enterprises and that the impact is potentially increasing; and (3) in terms of the industrial structure and corporate functions, the impacts vary and are only significant in some industries and corporate segments.

Key words: outward foreign direct investment, social network, overseas Chinese, location choice, Southeast Asia

LIANG Yutian, ZHOU Zhengke, LIU Yi. Location choices of Chinese enterprises in Southeast Asia: The role of overseas Chinese networks[J].Journal of Geographical Sciences, 2019, 29(8): 1396-1410.

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Industrial classification	Number of companies	Share (%)
Leasing and business services	2136	38.8
Financial services	28	0.5
High-tech manufacturing	514	9.4
Low-tech manufacturing	1330	24.2
Medium-tech manufacturing	728	13.3
Natural resources & energy	445	8.1
Software & information & communications technology	145	2.6
Transport services	166	3
Functional classification
Headquarters	160	3
Logistics	382	7
Production	1152	21
Research & development	322	5.9
Sales & marketing	2692	49
Support & servicing	784	14.3

Country	Year	Number	A proportion of the local population (%)	Tightness
Indonesia	2015	10,000,000	3.9	0.001283
Thailand	2015	9,500,000	14	0.00462
Malaysia	2015	7,500,000	24.7	0.008172
Singapore	2015	3,500,000	63.2	0.020898
Myanmar	2015	1,440,000	2.7	0.000883
Philippines	2015	1,960,000	1.9	0.000643
Vietnam	2015	2,610,000	2.8	0.000941
Cambodia	2015	860,000	5.5	0.001825
Laos	2015	190,000	2.8	0.000923
Brunei	2015	58,230	14.8	0.004548

Name	Introduction	Mean	SD
Number of overseas Chinese (Chinnum)	The number of overseas Chinese in a Southeast Asian country	3,761,823	3,615,877
Overseas Chinese communities (Chincomm)	If the number of overseas Chinese in Southeast Asia is more than 3437143, the value is 1. Otherwise, it is 0.	0.4	0.49
Ratio of overseas Chinese (Chinrate)	The number of overseas Chinese in a Southeast Asian country versus the total population of the country	0.14	0.18
Relationship density/tightness (Network)	The product of the proportion of overseas Chinese to the total population of country i in year t and the proportion of overseas Chinese to the total population of China in that year (t=2015)	0.004	0.006
GDP	GDP of a Southeast Asian country in 2015 (one billion USD)	243.81	246.11
Wage cost	Annual average wage of workers in a Southeast Asian country in 2015 (USD)	8973.6	9780.98
Corporate tax rate	Corporate tax rate for a country in Southeast Asia in 2015	22.35	3.72
Volume of trade	Total trade with China in 2000 (USD)	395,215.1	376293.8
Observations: 54,920	Investment 5492

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
In Chinnum	1
Chincomm	0.4745	1
Chinrate	0.1823	-0.1301	1
Network	0.1805	-0.1306	1	1
In GDP	0.8793	0.3044	0.2089	0.2072	1
In cost	0.0454	-0.1436	0.8434	0.8431	0.2064	1
Tax	0.2173	-0.0187	-0.5314	-0.5335	0.2247	-0.4994	1
In trade	0.8834	0.3214	0.3797	0.3780	0.9637	0.3603	0.0714	1

	(1)	(2)	(3)	(4)	(5)
In Chinnum	0.0774***		-0.391***
	(-0.0431)		(-0.0973)
Chincomm		0.197***	0.574***
		(-0.0475)	(-0.106)
Chinrate				5.294***
				(-0.228)
Network					159.9***
					(-6.886)
In GDP	0.0212	-0.0601	-0.301***	0.294***	0.294***
	(-0.0488)	(-0.0474)	(-0.076)	(-0.0492)	(-0.0492)
In cost	-0.326***	-0.419***	-0.774***	-1.377***	-1.377***
	(-0.039)	(-0.025)	(-0.0919)	(-0.0562)	(-0.0561)
Tax	-0.108***	-0.106***	-0.104***	-0.0762***	-0.0767***
	(-0.00528)	(-0.00536)	(-0.00535)	(-0.006)	(-0.006)
In trade	0.134**	0.228***	0.685***	-0.015	-0.015
	(-0.0627)	(-0.0379)	(-0.12)	(-0.0424)	(-0.0424)
Investments	5492	5492	5492	5492	5492
Observations	54920	54920	54920	54920	54920
Standard errors in parentheses	* p<0.01, p<0.05, * p<0.1