Empirical Study On The Effects Of Economic Freedom On Chinese Outward Foreign Direct Investment

Chinese foreign direct investment underwent the rapid development since ourcountry implemented the strategy of “going out”.To attract more and more scholarsstudied the driving factors behind Chinese outward foreign direct investment(OFDI)growing such as market size,exchange rate,trade relations,nature resources and othersfactors.In recent years,more and more scholars focused on the impacts of institutionsfactors on Chinese OFDI Among institutions factors,economic freedom as theindicators of institutions factors is in direct contact with per capita income,the level ofeconomic development,the degree of democracy,human development andpoverty.How to be the impacts of economic freedom on Chinese OFDI will be studiedurgently in the academic circles.Therefore,economic freedom as the starting point inthis paper,We will more comprehensive and in-depth study the impacts of institutionfactors on Chinese OFDI to provide theoretical and empirical evidence of our stableand orderly development of Chinese OFDI.In this paper,the concept of economic freedom and foreign direct investment hasbeen clearly defined. We have summarized the related research literature of theimpacts of economic freedom and the different dimensions on FDI.we took thesummary as logical start point.In order to better research the impacts of economicfreedom on Chinese OFDI,In this paper,We attempted to discuss the mechanism of theimpacts of economic freedom on Chinese OFDI to build the theoretical analysisframework from the four dimensions (business freedom,finance freedom,fiscalfreedom,government speeding).Based on this,this study analyzed the present situationof Chinese OFDI and economic freedom and focused on the regional distribution ofChinese OFDI and the trend of the different dimensions and investigated therelationship of economic freedom and the different dimensions of economic freedomand Chinese OFDI.Then,this paper confirmed the positive correlation between thehost countries’ economic freedom and the different dimensions and Chinese OFDI. For the sake of obtaining much more robust empirical support,this paper further builtthe static panel models(Fixed effects models) and the dynamic panel model(two stepSYS-GMM),based on2003-2012years Chinese OFDI to84countries ofcross-country panel data,to study the impacts of economic freedom and the differentdimensions of economic freedom on Chinese OFDI after controlled the hostcountries’ market size,exchange rate,labor cost and natural resources.This paperfound the host countries’ business freedom,financial freedom,fiscal freedom andgovernment speeding had the positive impacts on Chinese OFDI.the host countries’business freedom and fiscal freedom had the significant positive impacts on ChineseOFDI. However,the host countries’ financial freedom and government speeding hadthe only positive impacts on Chinese OFDI.The no significant positive reasons of theimpacts of the host countries’ financial freedom on Chinese OFDI are that Chinesedirect enterprises in host countries gained the certain protection in financial programsbecause bilateral investment cooperation between China and host countries aregrowing bigger rapidly and are that Chinese direct enterprises have obtained the“immunization” in host countries’ financial programs because stated-ownedenterprises accounted for no lower proportion among Chinese direct enterprises andstated-owned enterprises could obtain lots of benefits(such as no marketobjective,low interest loans). The no significant positive reasons of the impacts ofgovernment speeding on Chinese OFDI are that the host countries could share thesome industries with Chinese direct enterprises because of strategic reciprocalcooperation agreement between China and the host countries and are that Chinesedirect enterprises did not invested the some industries that the host countries squeezedout industries.This paper have shown that the host countries economic freedom had significantpositive on Chinese OFDI.The improvement of the host countries economic freedomwill attract Chinese OFDI.However,there are the difference the impacts of thedifferent dimensions on Chinese OFDI.Compared with the host countries’ financialfreedom and government speeding,Chinese OFDI paid more attention to the hostcountries’business freedom and fiscal freedom.