China's Foreign Direct Investment Area Location Choice Of Tax Factors Research

The paper tries to illustrate the taxation effect on the location selection of China's Outward Foreign Direct Investment (OFDI).Location selection is an important issue in the process of OFDI of Multi-National Corporation, but its theoretic system hasn't been completely established. Meanwhile, we can hardly find any systematic study on the taxation, which is an essential influencing factor on the OFDI location selection. As China has entered a fast developing period of OFDI since 2002, the study of taxation effect on the OFDI location selection is of great practical meaning.First of all, focusing on the taxation effect, the paper demonstrates that taxation imposes its effects on the OFDI location selection through three approaches. The paper then analyses the effecting factors on the efficiency of host country's tax favorable policy.Secondly, the paper focuses on the characteristics of OFDI different phases. Based on the study of typical countries, the paper analyses the correlation between OFDI location selection and taxation effect in each phase. Referring to the conclusion of the above study, adding the fact that China's OFDI is still in the primary phase, the paper concludes that there is high correlation between China's OFDI location selection and taxation effect.Thirdly, the paper establishes econometrical model to analyse the correlation between China's OFDI location selection and taxation effect. The conclusion tells that main influencing factors on China's OFDI location selection include effectiveness of enterprises'usage of host country's taxation favorable policies, host country's investment environment, tax rate comparing effect and host country's taxation favorable policies. The paper further analyses the influencing force of each factor.Finally, based on the study above, the paper raises suggestions on the strategy of China's OFDI location selection. In the meanwhile, based on the analysis about the defects of China's taxation policies on OFDI, several proposals are made by the paper on the policies.