An Empirical Research Of Determinants Of China’s OFDI To The US Manufacture Industry

Since the beginning of the 21stcentury, the economic globalization has been developing continuously and the China’s economy has been increasing rapidly. Meanwhile, the pace of China’s outward foreign direct investment (FDI) continued to accelerate. The United States, as the largest country in attracting foreign investment in the world, has also become the main target of many Chinese enterprises to invest, along with the gradual expansion of the scale of China enterprise’s outward foreign direct investment. Chinese company’s direct investment in US manufacturing have been expanding, in both total amount of investment and the number of investment projects. This thesis intends to analyze the current situation and characteristics of Chinese enterprises’FDI on the US manufacturing and explore key factors affecting Chinese company’s direct investment in US manufacturing industry.Since 1950s, foreign direct investment theory has been well developed in many perspectives in regard to both developed and developing countries. Literatures on actual state of Chinese enterprises’FDI development are also very fruitful. Scholars have analyzed the factors affecting the development of China’s outward foreign direct investment (OFDI), mainly related to the level of economic development of the host country and the size of the market factors, elements of resources and technology factors, the level of trade between the two countries factor between the two countries exchange rate factors, as well as trade policy factors. More research focus on the choice of investment location and to determine investment mainly, but less specific research on FDI focus on manufacturing industry in particular. Apart from this, scholars generally use OLS regression and VAR regression methods. They used impulse effect and variance decomposition method less.The aim of this research is to study key factors driving Chinese direct investments to the US manufacturing industry. Based upon current research literatures, this thesis will analyze the various factors that influence the path of Chinese companies to the US direct investment in manufacturing, using methods of qualitative analysis. Then, the part of empirical research selects the time-series data from 2000 to 2014 which includes Chinese direct investment in US manufacturing companies to establish the VECM model, using the impulse response and variance decomposition methods to test the effect of various factors on Chinese companies’OFDI to the United States manufacturing industry.This thesis has five chapters. Chapter 1 introduces the research questions, the characteristics of Chinese enterprises OFDI to the US manufacturing industry and the factors which influence it. At the same time, this part analyzes the background and significance, illustrate the ideas and research methods herein. Chapter 2 is the theoretical and literature review, including review of foreign direct investment theory, combing scholars’research on the various factors affecting China’s OFDI. Through literature review, factors affecting China’s foreign direct investment include the host country market size and level of economic development, resources and technical factors and other factors. But, scholars have the different research conclusions to the influence effect of each factor. Chapter 3 is a qualitative analysis section which summarizes the development status and characteristics of Chinese companies on US direct investment in the manufacturing sector from 2000 to 2014. Overall, the number and the total investment amount of China’s OFDI to the US manufacturing industry continued to increase, and the growth rate is accelerating. From the analysis of the type of the investor, private company accounts for a higher proportion of outward foreign direct investment project’s total numbers, as well as total amounts. From the type of investment is characterized by the number of Greenfield projects is more than the number cross-border mergers and acquisitions (M&A), but cross-border M&A accounted for the higher proportion of total investment. Next, this part of analyses the various factors, including the benefits of the US market size, labor resources, level of trade, exchange rate between the two countries and other factors, which will affect Chinese companies on US direct investment in the manufacturing sector, and analyzes the impact and effectiveness of the path, each of the above factors. Chapter 4 is the empirical study. Based on 2000 to 2014 data, select Chinese companies FDI flows on US manufacturing as explained variable to construct empirical models, and by ADF unit root test, co integration test, impulse response and variance decomposition on analyzing various factors that impact the Chinese enterprises’ OFDI to the US manufacturing industry. Chapter 5 is the conclusion part, the conclusions of the qualitative and quantitative analysis before, put forward policy recommendations for the current outward foreign direct investment and manufacturing development in China.