The Effects of Chinese FDI on Political Leaders’ Approval in Host Countries

• In Event: Domestic and International Institutions and Foreign Investment

Abstract

How does economic integration through foreign direct investment (FDI) affect host populations’ attitudes toward domestic politicians? Political leaders exert significant efforts to make their economies more attractive to foreign investors. Such efforts may suggest that FDI delivers political benefits to incumbent leaders: foreign investments are generally expected to create more economic opportunities for host populations, thereby improving their welfare. This, in turn, should result in a boost to domestic politicians’ public approval. At the same time, FDI could be detrimental to incumbents’ political support if foreign investors exclusively focus on exploiting natural resources, do not create new employment opportunities for host populations, or produce significant negative externalities, such as increased environmental degradation. We investigate the relationship between FDI and political leaders’ approval by focusing on Chinese FDI, which has become a significant source of capital in developing countries since the mid 2000’s and yet received relatively little scholarly attention. This paper seeks to evaluate domestic political effects of Chinese FDI, while controlling for foreign investment from other countries. Our empirical analysis uses an administrative-level dataset, which combines information on Chinese investment projects and political leaders’ approval data from Afrobarometer and Asian Barometer surveys.

Authors

• Elena V. McLean, SUNY, University at Buffalo

• Jeheung Ryu, Kookmin University