The economic determinants of Chinese foreign direct investment in Egypt

Purpose – This paper aims to investigate the determinants of foreign direct investment (FDI) by Chinese multinational enterprises (MNEs) over the period 1985-2011. Design/methodology/approach – This paper estimates a single equation model which uses long-run co-integration analysis and short-run analysis (error correction mechanism). This paper depends on annual data collected from the World Bank and the General Authority for Investment & Free zones Information & Decision Support Division for the period 1985-2011. Findings – This paper found a conventional result for market size. The author infers 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. The author also finds that policy liberalisation in China has had a positive influence in stimulating Chinese FDI in Egypt. Originality/value – Despite this model being used to estimate the determinants of FDI by Chinese MNEs in several countries, this is the first time it is being used in Egypt using a time-series analysis. Moreover, this model which has been used in this paper uses both long-run and short-run analyses.