Research Of The Main Factors Influencing The Distribution Of Chinese FDI In Russian Regions By Gravity Model

In 2018 China took the first place at top ten Asian countries investing in Russia.The number of Chinese projects in the Russian Federation increased by more than 3.5 times-from nine projects in 2016 to 32 projects in 2017.This is the highest rate for investors from China over the entire time of cooperation between Russia and China.That is why it is very important to know how these investments are distributed between different regions or Russia.Now more than 50%of Chinese FDI comes to Eastern part of Russia(especially,Transbaikal region)and about 40%to the Western part.There are almost no projects in the middle parts of Russia(Siberia and Ural regions).Available theoretical and empirical results shows that the region or country can be attractive for foreign investors if it has advantages comparing with other regions.There are three main advantages for investment:the size of the regional market(characterizes the volume of demand of goods and services in the region),the availability of natural resources and the distance between investing country and host country.This paper attempts to explore the factors affecting the distribution Chinese FDI among regions of Russia by gravity model.In this research,based on an econometric assessment of factors,it was found out that the distribution of Chinese FDI in Russia were explained by two main factors:the GRP of the host regions and territorial proximity to China of any of regions.The availability of natural resources did not give the regions a comparative advantage in attraction of Chinese FDI.There was given strategic suggestions for Russia to increase the investment flow from China.