The Impact of BITs and DTTs on FDI Inflow and Outflow: Evidence from China

CIGI Papers No. 75

August 27, 2015

This paper examines the impact of both China’s bilateral investment treaties (BITs) and double tax treaties (DTTs) simultaneously on China’s bilateral foreign direct investment (FDI) inflows and outflows. Using China’s bilateral FDI flow data from 1985 to 2010, the authors find that the cumulative number of BITs China signed has a positive (although not always statistically significant), but minor, impact on both China’s FDI inflows and outflows.

Using variables and different data methods, the authors find the following: the effect of a dummy BIT using dyadic data is always significant and positive for China’s FDI inflows, while negative but not always significant for China’s FDI outflows; the cumulative number of DTTs tends to promote China’s FDI inflows and outflows in most equations with weighted cumulative BITs; but tax treaty dummies do not reveal any robust effect on FDI flow. Generally, BITs and DTTs are more inclined to affect China’s FDI inflows than to affect China’s FDI outflows.

About the Authors

Hejing Chen worked as a post-doctoral fellow in the Department of Economics at Western University from September 2010 to June 2014. She holds a Ph.D. in economics from Xiamen University, and her research interests include international trade in services, China’s economic policies and international finance.

Chunding Li is a research fellow and deputy director of the international trade department at the Institute of World Economics and Politics, Chinese Academy of Social Sciences. His main research fields are international trade disputes, regional trade agreements, and policy modelling and simulation. 

Former CIGI Distinguished Fellow