Empirical Research On Motivations Of Chinese OFDI

Since China’s opening-up strategy, IFDI and OFDI have increased dramatically, especially in 2000s. In 2013, China has become the third largest country to implement oversea investments. Hence, it is meaningful to investigate the motivations of China’s OFDI underlying the huge amount of oversea investments. Conventional OFDI theories categorize developing countries’ OFDI as market-seeking, resource-seeking, strategic-seeking and efficiency-seeking (Dunning,1981; 1996). Foreign scholars have partially proved the theories in developed countries while domestic studies in this area have just started up. Most of the domestic studies concentrate on OFDI towards a certain region or from a specific industry. This research will use static and dynamic panel data analysis to investigate motivations of China’s OFDI, with the latest data from 2008 to 2013 and control of influence from economic level.There are two hypotheses in this research. China’s OFDI seeks for strategic assets and natural resources after the 2008 financial crisis. In the full sample analysis, both hypotheses are proved to be correct. In the sub-sample test, we divide up the full sample according to the economic status of host countries. There are two sub-samples, developed countries and developing countries. The empirical analysis shows that China’s OFDI seeks for high-technology resources in the developed countries while the investments have preferences for natural resources in the developing countries. In the GMM dynamic panel data analysis, the finding is that previous investments toward a specific industry in the host country will stimulate more investments in the future. Besides, natural resource endowment in the host countries has a positive correlation with China’s OFDI.Besides the hypotheses, this research also examines some other motivations of China’s OFDI. The first control variable of this research is GDP per capita, which is found to be negatively correlated with China’s OFDI. This finding contradicts with conventional theories, from which we could deduce that the market-seeking motivation of China’s OFDI has weakened after the 2008 financial crisis. The second control variable is economic freedom, represented by the Economic Freedom Index. In the full sample test and sub-sample test of developed countries, this control variable is found to be positively correlated with China’s OFDI. This indicates that Chinese firms tend to invest in the countries with higher level of liberalization. The third control variable in this research is inflation rate. This control variable is found to have a positive correlation with China’s OFDI in the full sample test and sub-sample test of developed countries. This finding is also contrary to conventional theories. It could be reasonable that moderate inflation rate represents that the economy is developing steadily, which will attract more China’s OFDI.The innovation of this research lies in the following ways. Firstly, this research is a thorough and comprehensive study that is aimed at re-examining the motivations of Chinese OFDI. Hence, this research is a comprehensive study on the motivations of China’s OFDI after the 2008 financial crisis. Secondly, this research uses different methods to study the motivations of China’s OFDI. When choosing indicators, relative level of variables are considered instead of the absolute level of variables, which eliminates the influence of large economic volumes. Besides, it will be more accurate in investigating the relationship between resource endowment and China’s OFDI. Finally, this research combines static model and dynamic model, which both increases robustness of the tests and complement the conventional theories by providing a convincing empirical test from China.It could not be neglected that there are some limitations of this research. Firstly, the paucity of data source has created fragmentary data that will influence the accuracy of empirical analysis. Secondly, this research still lacks innovation in theoretical studies. There are some features peculiar to developing countries that are not considered in this research, e.g. the influence of governmental policies on investments from state-owned firms. Finally, there are some findings that are contrary to conventional theories. Further studies are required to figure out the underlying reasons.