The Political Dimensions of Chinese Outward FDI and Their Implications for the Liberal International Order

This chapter examines how Chinese outward foreign direct investment (FDI) could have a political impact in recipient countries. It focuses on five distinct aspects: the degree of structural power of Chinese multinational enterprises, the direct influence and leverage China could have over individual countries receiving Chinese FDI, the enhancements in Chinese (technological) competition resulting from investment activities, the misuse of FDI for national security purposes, and the use of FDI to enhance China’s international soft power. For each of these aspects, the chapter identifies potential avenues of political impact in recipient countries, yet it also finds that there are considerable limitations in the extent to which Chinese multinationals effectively influence politics. Some Chinese FDI can even generate desirable political outcomes for recipient countries. The chapter concludes that outward FDI cannot be considered as a particularly suitable economic activity to support a challenge to the Liberal International Order.