How Do China’s OFDI Motivations Affect the Bilateral GVC Relationship and Sustainable Global Economy?

The purpose of this paper is to analyze how China’s outward foreign direct investment (OFDI), driven by different motivations, affects the bilateral global value chain (GVC) relationship between the home country (China) and host countries, evaluating both bilateral GVC trade value and relative GVC positions. Employing the OECD Trade in Value Added (TiVA) database combined with Chinese listed firm data, we found the following results: (1) Strategic asset-seeking OFDI strengthens the GVC relationship between China and host countries while enhancing China’s GVC position relative to host countries. (2) Efficiency-seeking OFDI increases the domestic value-added exported from host countries to China but does not improve China’s relative GVC position. (3) Natural resource-seeking OFDI enhances bilateral GVC trade volumes but has no significant impact on the relative GVC positions of China and host countries. (4) China’s OFDI, not driven by these motivations, generates a trade substitution effect between home and host countries. We also examined the heterogeneity of these effects. Our findings suggest that China’s OFDI fosters equitable and sustainable international cooperation, supports mutually beneficial GVC trade and host-country economic growth, and therefore, progresses toward Sustainable Development Goal (SDG) 8.