The Importance Assessments Of Institutions On The Location Choice Of Chinese Foreign Direct Investment

With obviously collocating of productivity factor in the world, the global steps of economy have been making much progress. More and more Chinese enterprises begin to go out for the foreign direct investment and at the same time the Chinese government also begins to pay attention to the strategic issues of foreign direct investment for these corporations, therefore, the research on the location choice has the theoretical and realistic meanings. Up till now, most scholars have regarded the hard environment and economic factors as the main influencing factors to the foreign direct investment and have neglected the function of the institutional factors. In fact, the institution plays an important role on the location choice of Chinese foreign direct investment. As an important respect of the position advantage of host countries, the institution not merely influence the position of foreign direct investment, but comparing to the natural assets, market structure, and large-scale production and so on, it causes scholars more and more attentions to the function of absorbing the foreign direct investment.The text at first choose the theories with the position of foreign direct investment, relevant contents of institutions and forefathers researches on the influence of the institutional factors to be the foundation to the position of direct investment and get the conclusion that the institutional factors are very important on the position advantage. Then introduce the current situation of our country and analyze the three respects of institutional factors, such as the host countries and the enterprises.Owing to the importance of the institutions and in order to get the most effective factors from the other institutional factors, in the text, it is used the gravity model, the real institutional data of 50 countries which china has invested in 2006, GDP and distance as control variables, the paper proved the ten institutional factors which affect the location choice of foreign direct investments of our Chinese enterprises. The first is property right of the host countries; the second are the arrangements of host countries' economic institution, such as trade freedom, investment freedom, monetary freedom, freedom from the government, financial freedom and fiscal freedom; the third are business freedom, freedom from corruption and labor freedom in host countries. In order to compare the degree of the ten factors, the paper adopt the gradual return method, that is putting the ten factors into one equation and finally get the following conclusion: the property right and the arrangements of economic institution in host countries have the greatest influence. Finally on the basis of the conclusion, in order to solve the institution obstacle during the foreign direct investment, the paper lists the policy recommendation on the location choice of Chinese foreign direct investment both on our government and enterprises.