UC San Diego

This dissertation elucidates the domestic politics of China's outward direct investments and its international implications. A current puzzle in CPE/IPE research is whether international investors from autocracies, particularly state-owned enterprises (SOEs), are profit- maximizing firms or agents of the state. Using formal analysis and two sets of original firm-level data on Chinese investments, I demonstrate that the behaviors of China's SOEs reflect both state preferences and firms' profit incentives and that the interaction of the two can lead to perverse outcomes unintended by the state : China's political elites depend on SOEs to carry out certain state objectives (e.g. energy security) and devise preferential policies (e.g. subsidies, insurance, bailouts) that enable firms to accomplish these objectives. SOEs, however, take advantage of these policy perquisites to seek rents. Knowing that the state will bail them out when investments fail, they take excessive risks when choosing host countries to earn high returns, ultimately passing on the cost of failed investments to the disenfranchised public. I apply this core insight to evaluate three aspects of China's approach to outbound investments: investment decisions by Chinese firms; the effect of Chinese investment on host country development and governance; and China's foreign policy toward economies that are the sites of its foreign investment