A double-edged sword: Chinese direct investment in Latin America.

• Based on GTAP 10 database, RED-ALC China and China Global Investment Tracker database, we use the CGE model to simulate the influences of Chinese multinationals' investment on Latin American and Caribbean (LAC) economies. • Chinese investment and the booming economy are the engines for LAC development. • Chinese ODI contributes to GDP growth, and trade balance improvement in LAC. • The industries with resource endowments in LAC have expanded largely and squeezed out the production of manufactures. Under the 'Belt and Road' initiative, China has expanded its footprint in Latin America and Caribbean (LAC) and contributed to LAC FDI stock, as well as, gross fixed capital formation and GDP. Based on the firm-level Chinese investment data and GTAP database, this paper uses the computable general equilibrium model to estimate the influences of Chinese direct investment on LAC economies. Chinese ODI and the booming economy are the engines for LAC development, according to its contribution to GDP, and trade balance improvement. The rest of LAC economies, China and US benefit indirectly from Chinese investment as well. Each country gives its full play to its comparative advantages. However, it is cautious that the industries with resource endowments in LAC have expanded largely and squeezed out the production of manufactures, which makes LAC economies more dependent on the growth of Chinese economy. [ABSTRACT FROM AUTHOR]