Can China’s outward foreign direct investment effectively influence the energy transition of host countries?

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As China’s Outward Foreign Direct Investment (OFDI) accelerates its shift toward greener practices, its growing commitment to clean energy has become a key driver in the global energy sector’s transition toward low-carbon development. To investigate whether China’s OFDI influences the renewable energy transition of host countries, this study conducts an empirical analysis based on panel data from 57 countries with close cooperative ties to China spanning 2005–2022, employing a two-way fixed effects model and further introducing moderation and threshold regression models to examine the moderating effect of government governance and the threshold effects based on economic development and industrial structure.

The findings reveal that China’s OFDI significantly promotes renewable energy development and the energy transition process in host countries. This positive effect is further enhanced when the host country demonstrates a higher level of government governance.

Furthermore, the study identifies distinct non-linear threshold characteristics in the impact of China’s OFDI: its catalytic role becomes significantly stronger only after the host country’s economic development level and level of industrial structure advancement surpass specific thresholds. This study directly addresses the international community’s concerns regarding the motives behind China’s investments. It provides empirical evidence and theoretical support for optimizing China’s outward investment strategy and contributing to developing a global clean and low-carbon energy system.

Source: Wikipedia