The Current Situation And Determinants Of China’s FDI Towards The European Union

In recent years, the bilateral economic relation between China and the European Union has been well developed. In 2012, the EU was still the largest trading partner of China and China continued to be the second largest trading partner of the EU. However, inconsistent with the huge trade scale, China’s foreign direct investment towards the EU countries is very limited, which means there is still plenty room for it to grow in the future. Besides, under the double strikes of the Subprime Crisis and the European Debt Crisis, the export to the EU has been impaired because of the shrink of demand in the EU. The assets inside the EU have also become cheaper due to Euro’s depreciation. Moreover, EU’s authorities have more or less loosened control of foreign investment All the reasons above have made investing in Europe never more attractive to Chinese enterprises.Under this background, this paper researched on China’s foreign direct investment towards the EU. At first, this paper reviewed the development process of China’s FDI towards the EU, and then summarised the entry mode, investing companies, selection of the areas and industry distribution of the investments. Next, this paper analysed the motives of Chinese companies which invested in the EU within the framework of Prof. Denning’s Eclectic Theory of International Production, and thereby came to the theoretical analysis of the possible influences. After that, this paper constructed a fixed effect model to perform empirical analysis via Stata. According to the conclusions, the GDP of the EU member states and whether they are "Tax Haven" countries have extremely significant positive influences on China’s FDI towards the EU. While the exchange rates of the currencies in EU member states have extremely significant negative correlations with China’s FDI towards the EU. Regarding the other five factors such as the export of minerals, they are all positively or negatively significantly correlated to China’s FDI towards the EU. At last, according to the problems posed by Chinese firms during their investing process, this paper offered corresponding solutions on both national level and enterprise level.