An Analysis Of The Factors Affecting The Location Choice Of China's Outward Foreign Direct Investment

This thesis uses China's OFDI data for 33 countries in 2006-2017.based on three motivations for foreign direct investment including resource seeking,market seeking and strategic asset seeking.The agent variables that measure the technical level,resource endowment and tax level of the host country are used as control variables.The agent variable that measures the host country institutions,and the institutional distance between the host country and China are taken as the core explanatory variables to explore the factors influencing the location choice of China's outward foreign investment.Referred to the World Bank's World Development Database institutional level measurement standards,this paper introduces the global governance indicators as the variables measuring the level of the host country institutions,including six institutional factors,they are respectively Control of Corruption,Government Effectiveness.Political Stability and Absence of Violence,Regulatory Quality,Rule of Law,Voice and Accountability.Establishing an overall institutional model to explore the impact of the overall institutional level of the host country on China's investment in the country.The results show that China's outward foreign direct investment is positively correlated with China's market size and resources endowment of host country,and is negatively correlated with the geographical distance between the two countries.The further subdivision institutional model explores the impact of six institutional variables on the location selection of China's outward foreign direct investment.Further adding the institutional distance and to explore the influence of institutional differences between China and the host country on the location choice of China's OFDI.Specifically.China's outward foreign direct investment has a significant positive relationship with the country's resource affluence.The regulatory quality in the host country is significantly positively related to China's outward foreign direct investment to this country.The institutional distance between China and host countries has the positive influence on the location choice of China's OFDI.The larger the distance between China and the host country system is,the more China tends to invest in this country.The overall institutional level of the host country,the level of the tax rate and the technical level of the host country have no significant impact on China's outward foreign direct investment in the host country.The above empirical results show that China tends to invest the host country with rich resources,high regulatory quality,and relativey large instutional distance from China.At the same time,considering that location choice of China's OFDI has a certain concentration,and the sample individuals also have obvious regional heterogeneity in terms of market size,resource endowment and technology level,therefore,the overall sample is subdivided into two sub-samples of developed economies and developing economies.It is further explored that the differences in factors considered when China investing in host countries with different levels of development.The results show that China's main considerations when investing in developed and developing economies are different.When investing in developed economies,Chinese enterprises are more inclined to choose countries with higher levels of science and technology,weaker voices and accountability,and to invest in countries with smaller institutional distance from China;When investing developing countries and regions,the resource endowment and corruption control of the host country are important factors for location selection.they tend to invest in developing countries and regions with rich resources and strong corruption control.and to invest in developing countries with larger institutional distance from China.In addition to the market seeking motivation,technology seeking motivation and resource seeking motivation,China's outward foreign direct investment incentives are partly due to tax avoidance,return investment,capital flight,political aid or national strategic investment,which makes China's outward foreign direct investment a feature of regional concentration.The institutional environment of the host countries that China' OFDI concentrated on,is relatively weak to the developed countries in Europe or America,For the above phenomenon,China should pay more attention to the improvement of quality of OFDI when paying attention to the increase of the total amount,especially to the real compliance of outward foreign direct investment.The relevant government departments should strengthen the control over the abnormal behavior of Chinese enterprises' overseas investment,and raise the level of risk supervision and control over the whole process of Chinese enterprises'OFDI.Further more.,China should improve the domestic institutional environment,and guide Chinese enterprises to invest in developed countries and high-tech countries to promote domestic industry transformation and upgrading.We need find out the scale and structural characteristics of China's outward foreign direct investment at this stage,explore the key affecting factors of China's OFDI location selection,and pay attention to the real needs and existing problems of Chinese enterprises' location choices of OFDI.Therefore,we can correctly understand the actual degree of China's opening up,provide a good environment,and the solution to respondto changes in the international situation,and suggestions for domestic capital retention decisions for "going out" enterprises.Improve the quality of China's outward foreign direct investment to achieve the healthy and sustainable development of China's OFDI,and to create economic and social benefits for China,the host countries and the whole world.