The Impact Of OFDI Destination Selection On China's Export Domestic Value Added

Since the reform and opening up in 1978,China has made great achievements in Outward Foreign Direct Investment(refer to as OFDI).By the end of 2015,China's domestic investors made non-financial direct investment to 155 countries or regions,6532 overseas enterprises,reached the highest value in history--118.02 billion US dollars(equivalent to 7350.8 billion yuan),with an increase of 14.7%.As the world's second largest economy,China is still at the bottom of the global value chain,engaging in the production of low value-added links(mostly labor-intensive industries)in the international division of labor system.Today,China's labor costs continue to rise and foreign competition is increasingly fierce,in the face of changes in internal and external environment,China is urgent need to form a new advantage to participate in the global value chain.OFDI is the main way for enterprises to participate in the global value chain,through this way domestic enterprises can obtain management rights of foreign enterprises.It is an important form of global trade.But the primary problem is "where to go".According to the global value chain and smile curve theory,OFDI can occupy the both end of "product smile curve" or "industry smile curve" to increase the value added.This not only can enhance the quality of trade,but also affect the international layout of the industry.To answer these questions,we must clarify the exact location of the products and enterprises in the global value chain.Then it is undoubtedly a high theoretical and practical value to explore the method of improving the trade quality.So how can our enterprises choose a destination of OFDI to deepen the level of integration into the global value chain and increase the value added? What is the difference between the quality of the system of different host countries? To answer this question is both theoretical and practical.In 2015,China's foreign direct investment stock reaches one trillion US dollars for the first time.How to increase the value added of OFDI has became a hot research.Based on panel data from 1998 to 2011,this paper explores how the choice of destination of OFDI affects the value added of domestic exports,co nsidered with the quality of host country system.First,the paper analyzes from six dimensions(corruption regulation,government effectiveness,political stability,supervision and management,legal system and the right of democratic freedom).Then in order to consider all aspects,the paper makes further analyzes the above indexes by means of principal component analysis method.The results of the study found that,whether from the various dimensions or from the comprehensive indicators of the study,enterprises make investment to destination of higher quality of the system can obtain more export domestic value added.