A Study On Entry Mode Of Foreign Direct Investment In China

FDI(foreign direct investment) in china have experienced three stage divided in turn as CJV(contractual joint venture), EJV(equity joint venture) and WOS (wholly-owned subsidiary) which was used as the major entry mode. At the early time in 80s',beacaude of having advantage of reclaiming investment quickly and little investment risk, foreign firms set up CJV mostly in non-manufacturing project. Subsequently, government restricted FDI in non-manufacturing field, and made the policy benefited EJV investing in manufacturing field. To foreign entrepreneurs, aiming to acquiring information and marketing resources, they also actively cooperated with Chinese firms in EJV forms. In the middle of 80s', EJV became the most popular investment forms. At the end of 90s',many field allowed foreign firms which had owned information and marketing resources themselves set up WOS, and WOS now is the major investment form.The paper have collect data pertains to more than 300 foreign entrepreneurs and estimate a logit model. The empirical findings tell us that the intangible assets, investment circumstances, production export ratio, technology sophistication have positive correlation with probability of setting up WOS, but capital intensity and yield ratio have opposite effect. With investment circumstances in china becoming better, global strategy the foreign firms begin and even more cross-nation investment entrepreneurs coming to china, more and more FDI in china will choose the form of WOS. So, there is little effection by regulation restriction to WOS. Keeping market competitive, heightening technology sophistication and keeping charge of unique resources should be the major methods Chinese government and firms use.