To Divide or Not to Divide: The Relationship between Chinese Foreign Direct Investment and European Countries' Foreign Policy Views

Abstract

In recent years, many observers have argued that China has sought to use economic leverage to divide and conquer Europe. Of particular concern has been the role of Chinese outward foreign direct investment (COFDI) in European states. Is there a relationship between Chinese investment in a country and this country’s foreign policy views towards China? This thesis probes the existence and direction of such a connection between COFDI and a country’s foreign policy views in Europe. To do so it proposes four central hypotheses that may explain this relationship. The first hypothesis posits that COFDI will have political effects, while the second and the third hypotheses suggest that COFDI may be politically or economically motivated. Finally, the fourth hypothesis predicts variation among the regions of Europe in their relationships with COFDI. To evaluate these four hypotheses, I use a mixed-methods approach combining linear regression analysis with qualitative case studies of the relationship between COFDI and a variety of countries located in different regions of Europe. The results find that there is no statistically significant relationship between COFDI and a country’s foreign policy views. This thesis then examines what the lack of such relationship implies. In addition, the case studies explore instances that are pointed to by observers as suggestive of China’s attempt to divide and conquer Europe. Overall, this thesis concludes that while there is a lot of attention in the press about COFDI causing fractures among Europe, these are outlying instances that are not indicative of a larger relationship between COFDI and European countries – at least for now.