Rethinking Location and Internationalization in IB: Capital Transit and the Offshore Structuring of Chinese FDI

We examine how Chinese multinational enterprises (CMNEs) use intermediary jurisdictions to channel capital-in-transit (CIT) foreign direct investment. We ask which national jurisdictions function as CIT hubs and what types of firms are used to route these flows. Prior research on CMNE location choices often misclassifies CIT-related shell entities as operational subsidiaries or excludes them altogether, which can bias conclusions about internationalisation patterns. Drawing on ORBIS BvD (2023), we analyse 34,925 foreign subsidiaries with Chinese global ultimate owners and use logistic regression to test whether CMNEs disproportionately establish subsidiaries in offshore and conduit jurisdictions and whether specific industries are systematically associated with CIT structures. The results show extensive routing through well-known offshore centres such as the Cayman Islands, Hong Kong, and Singapore, while also highlighting prominent European conduits, notably the Netherlands and Luxembourg. We further find that CIT activity is strongly linked to particular industries, especially financial services, head office activities, and motor vehicle manufacturing which frequently rely on investment-holding companies (NACE 6420) as key routing vehicles. Overall, the findings underscore the methodological risks of treating all foreign subsidiaries as genuine operating entities and demonstrate the importance of distinguishing operational subsidiaries from financial structuring affiliates to improve empirical research on CMNE internationalisation and related policy debates.