The role of English as a lingua franca in FDI: Evidence from China

This paper examines the impact of English as a lingua franca on FDI by using the bilateral FDI data between China and 36 OECD countries. We find that English as a lingua franca significantly promotes FDI between China and OECD countries; the impact of English proficiency on outward FDI is greater than that on inward FDI in China; the improvement of English proficiency is more conducive to promoting China's FDI with non-English-speaking countries than with English-speaking countries. Our findings suggest that English can be an effective lingua franca to remove language barriers in FDI for developing countries, especially when the investing partners are high-income and non-English-speaking countries.