The Location Analysis Of China’s Foreign Direct Investment In Europe

In recent years, with the implementation of the "going global" strategy of the Chinese government, more and more Chinese enterprises began to invest overseas. The scale of China’s outward foreign direct investment(OFDI) showed a rapid growth, during which the European countries who were suffering from the debt crisis in recent years have become important destinations for Chinese investors because of its low asset prices and excellent international brands.This paper is aimed at studying the main location factors for Chinese enterprises when investing in Europe with theoretical modeling, empirical research and data analyzing. To be specific, this paper studies what are the important factors that make Chinese companies invest in some specific European countries while not the others.Firstly, the paper shows the current situation of China’s OFDI in Europe from both the macro and micro levels. Based on that, this paper then researches the main location factors affecting the geographical distribution of Chinese companies from the foregoing description with the methods of data comparison and analysis. And then Porter’s diamond model is borrowed to help build the theoretical model of this paper. Finally, to verify those location factors previously obtained, the paper adopted the empirical analysis to test if they are significant or not. Conclusions show that Chinese companies in different industries and ownership react quite differently against those location factors. However, in a board perspective, demand conditions, national structural strategy and government policies are generally significant factors which positively affect Chinese companies’ OFDI in Europe while production factors and supportive industries are not that significant.This paper focuses not only on economic data, but also on non-economic factors such as government policy, national history and culture, as these factors are very important for foreign direct investment; especially in "reverse investment", where the investment flows from less developed countries to more developed countries.