The Economic Determinants of Chinese Foreign Direct Investment in Egypt

Abstract

This chapter investigates the determinants of foreign direct investment (FDI) by Chinese multinational enterprises (MNEs) over the period 1985–2011. This chapter estimates a single-equation model which employs long-run co-integration analysis and short-run analysis (error correction mechanism (ECM)). This chapter is founded on a conventional result for market size. I infer from the significant role played by Egyptian natural resource endowments that the institutional environment has strongly shaped Chinese FDI, leading to significant natural resources-seeking FDI. I also find that policy liberalisation in China has had a positive influence in stimulating Chinese FDI in Egypt. Despite this model has been used to estimate the determinants of FDI by Chinese MNEs in several countries, this is the first time to use it in Egypt using a time series analysis.