The objective of this paper is to understand ‘why’ the Chinese firms are
investing outside China, and ‘how’ China stands to gain from this decision. For our
analysis, we consider the case of China’s trade, and investment relation in the Greater
Mekong Sub-region (GMS). We find that a reason for the Chinese firms to invest in
the GMS has to do with higher domestic input cost, as well as, to evade protectionist
measures in the US and the EU. As to, ‘how’ China stands to gain, it is largely
explained through elements of complementarities in trading and investment
relationship.