The Determinants of Chinese Outward Foreign Direct Investment
This paper investigates the determinants of foreign direct investment (FDI) by Chinese multinational enterprises (MNEs) over the period 1984 to 2001.1 The process of China’s deepening re-integration with the global economy began, in the modern era, with the ‘Open Door’ policies of the late 1970s, and accelerated with accession to the World Trade Organisation (WTO) in 2001. Studies of this process generally examine China in terms of its position in global trade flows (e.g., Lall and Albaladejo, 2004); its comparative advantage as a manufacturing location (e.g., Chen et ah, 2002; Rowen, 2003); and in the volume, distribution and impacts of inbound FDI (e.g., Buckley et ah, 2002; Buckley, 2004b).2 In contrast, understanding of a further dimension to this process — namely, the rise in Chinese outward direct investment (ODI) — remains very incomplete. One reason is the paucity of sufficiently disaggregated data to permit formal analysis of the forces shaping Chinese ODI. The result has been a preponderance of descriptive research on FDI trends (e.g., Taylor, 2002; Deng, 2003, 2004; Wong and Chan, 2003; Buckley et ah, 2006) coupled with in-depth case studies on a small number of high-profile Chinese MNEs (e.g., Liu and Li, 2002; Warner et ah, 2004).
KeywordsForeign Direct Investment Political Risk Outward Foreign Direct Investment Capital Market Imperfection Cultural Proximity
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