Political economy of Chinese investment in Türkiye: recent trajectory and structural constraints

Abstract

Expectations regarding China’s potential positive role in Turkey’s economic development have risen in recent years, particularly since Turkey joined the Belt and Road Initiative (BRI) in 2015. However, the existing literature lacks a data-driven analysis of China’s economic engagement in Turkey. Based on a review of approximately 10,000 company files, this article addresses the gap by introducing and analyzing a newly compiled dataset of 1,382 foreign-invested firms operating in Turkey. Our study presents four main findings. First, official data on foreign direct investment (FDI) in Turkey has significant shortcomings, including the mislabeling of closed firms as active, registering non-Chinese firms as Chinese, and vice versa. Second, while Chinese investment in Turkey has increased notably, China remains a relatively minor player in Turkey’s FDI landscape and does not currently challenge Western influence on the Turkish economy. Third, Chinese investments have largely been concentrated in low-value-added sectors, with minimal impact on Turkey’s industrial upgrading and research and development (R&D) capabilities. Finally, the limited developmental impact of Chinese investment is less a result of Western influence or specific shortcomings of Chinese investors, and more due to Turkey’s internal weaknesses, including issues with labor force quality, scientific infrastructure, and bureaucratic capacity. These endemic challenges hinder Turkey’s ability to attract significant, transformative FDI from any country, including China.