How home and host country industrial policies affect investment location choice? The case of Chinese investments in the EU solar and wind industries

The paper explores the influences played by asymmetries between European and Chinese incentive policies in renewable energy sources (RES) on location choice of Chinese investments in the EU. In the last decade, while EU countries relied on demand-oriented policies in the RES, China has been directly promoting supply-side interventions to support the domestic production of components. We advance the literature on determinants of Chinese investments abroad, by including relevant variables related to industrial selective policies of RES in home and host countries. By using a firm-level database from the Ministry of Commerce, we perform logit analysis, linking the features of Chinese photovoltaic (PV) and wind investments in EU to the supporting policies, as well as to institutional factors and endowments of resources in home regions and host countries. Our paper confirms the findings of previous studies, as far as institutional factors and country endowments impact on location choice. For selective policies we get interesting outcomes. The host EU countries have acted as catalyst for Chinese investments in Europe in search for market opportunities, while generous production subsidies at provincial level in China have discouraged Chinese investments abroad.