Sustainability Impacts of Chinese Outward Direct Investment: A review of the literature

The report analyzes 384 sources in English, Chinese, and Spanish to assess the sustainability impacts of Chinese outward direct investment. It identifies a tension between the positive contributions to infrastructure and economic growth and the negative impacts related to labor conditions, environmental degradation, and governance. The review highlights a 'learning curve' where Chinese firms and policymakers are increasingly adopting corporate social responsibility (CSR) and international standards, though a gap remains between policy and project-level implementation.

• Chinese outward direct investment (ODI) significantly contributes to infrastructure development in developing countries, particularly in Africa and Asia, by improving access to transportation and telecommunications, although the quality of services in the ICT and construction sectors is viewed inconsistently.
• While Chinese investments generally boost macroeconomic growth and government revenue in host countries, there are widespread concerns regarding trade imbalances—where host countries export raw commodities and import value-added products—and China's potential economic control over host nations.
• Chinese companies often exhibit weak backward linkages with local suppliers in host countries, frequently sourcing materials from China due to a lack of specialized local networks, high costs, or poor quality of local goods.
• There is evidence of technology and skill transfer, particularly through training centers established by ICT firms like Huawei and ZTE, but some African governments report that substantial technology transfer remains limited because investments are often resource-seeking or domestic-oriented.
• Chinese investments in resource-rich but poor countries may exacerbate the 'resource curse,' where 'no-strings-attached' investment policies may stabilize authoritarian regimes and elite behaviors detrimental to development.
• Chinese enterprises contribute to local job creation, and there is a trend toward increased workforce localization; however, there is a persistent preference for Chinese nationals in senior managerial and supervisory positions.
• There are widespread accusations of poor labor conditions in Chinese-run overseas operations, including inadequate health and safety standards, excessive working hours, and the use of casual contracts to avoid providing legal benefits.
• Chinese agricultural investments have faced criticism regarding 'land grabs' and the displacement of local populations, although some empirical research suggests the scale of such acquisitions is often smaller than reported in media headlines.
• Chinese operations have caused significant environmental damage, including illegal logging and problematic environmental impact assessments (EIAs) that lack third-party verification or meaningful community consultation.
• China is a leading global investor in renewable energy infrastructure, specifically solar and wind, driven by domestic manufacturing capacity, government policy support, and a desire to improve its international reputation as a contributor to climate mitigation.
• Chinese investments can negatively impact host country governance by cultivating corruption and lacking transparency in loan terms and operational data, which may undermine international efforts like the Extractive Industries Transparency Initiative (EITI).
• The sustainability impact of Chinese ODI is heavily influenced by the host country's institutional quality; negative impacts are often exacerbated by ambiguous regulations, lack of implementation systems, and political conflicts in the host economy.
• Chinese governments and financial institutions (such as China Development Bank and China ExIm Bank) have introduced new guidelines and 'green credit' policies to promote CSR and environmental protection, though these are often non-binding recommendations rather than mandatory regulations.

APA

Wang, Y., & Zadek, S. (2016). Sustainability Impacts of Chinese Outward Direct Investment: A review of the literature. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/sustainability-impacts-chinese-outward-direct-investment-literature-review.pdf

Chicago

Wang, Yuan, and Simon Zadek. Sustainability Impacts of Chinese Outward Direct Investment: A review of the literature. International Institute for Sustainable Development, 2016. https://www.iisd.org/system/files/publications/sustainability-impacts-chinese-outward-direct-investment-literature-review.pdf.

Wikipedia

{{cite report |last1=Wang |first1=Yuan |last2=Zadek |first2=Simon |title=Sustainability Impacts of Chinese Outward Direct Investment: A review of the literature |publisher=International Institute for Sustainable Development |date=January 2016 |url=https://www.iisd.org/system/files/publications/sustainability-impacts-chinese-outward-direct-investment-literature-review.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wang2016sustainability, author = {Wang, Yuan and Zadek, Simon}, title = {{Sustainability Impacts of Chinese Outward Direct Investment: A review of the literature}}, institution = {International Institute for Sustainable Development}, year = {2016}, month = jan, url = {https://www.iisd.org/system/files/publications/sustainability-impacts-chinese-outward-direct-investment-literature-review.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }