Chinese investments in the European Union - a critical approach
Pablo Muylle
Chinese outward FDI increased sharply over the last decades, subjecting them to considerable
public debate. Yet, empirical research concerning Chinese investments in the EU is sparse. In
this thesis, we attempt to investigate in a comprehensive way if and how Chinese investments
in the EU differ from investments with other origins. Our empirical analysis focuses on factors
attracting Chinese investments in France and on how Chinese ownership affects the size, performance, and productivity of French firms. By applying an IV probit model, we find that that
higher international experience of the target firm attracts Chinese investors, but also that they
are comparatively less discouraged by the poorer financial health of their targets. Furthermore,
using an IV fixed effects model, we find clear evidence that Chinese ownership is associated
with a smaller size, poorer performance, and lower productivity of the French subsidiary. These
results remain valid after rigorous robustness testing by using propensity score matching and
restricting our sample to various subsamples, although the negative effect associated with Chinese ownership loses significance taking into account the level of democracy and annual growth
rate of the owner’s country. This may imply that Chinese investments are “special” by the
important role of the state and by the economic environment in China stimulating its firms to
catch up quickly.