China’s Outward Foreign Direct Investment: Evidence from 2003-2008

This paper investigates the main determinants of Chinese outward direct investment (OFDI), while examining the moderating effects of host and home country institutional factors. The GLS regression model and official data covering Chinese OFDI into 62 countries from 2003-2008 were used to test six hypotheses, of which four were supported. One major finding is that Chinese MNEs demonstrated stronger motives for seeking natural resources than for seeking market entry, cost reduction, or the acquisition of strategic assets. In making global location selection decisions, the host and home country institutional factors were found to have affected Chinese MNEs, but the effect varied depending on the contours of individual OFDI projects. It was also found that conventional theories of FDI relevant to advanced and emerging market economies were all applicable to the explanation of recent Chinese OFDI during this period.