Emigration and outward FDI in China: Key role of institutional quality

Using the cross-sectional data of 111 destination countries related to China, this paper examines whether institutional quality matters for the nexus between Chinese emigration and outward foreign direct investment (FDI) in destination countries. The empirical results demonstrate that institutional quality amplifies the positive effect of Chinese emigration on outward FDI, even after accounting for potential endogeneity with an instrumental variable approach using the 2SLS estimation. Specifically, the political stability and absence of violence/terrorism, government effectiveness, the rule of law, and control of corruption will positively moderate the emigrate-FDI relationship.