Study On Location Selection Of Foreign Direct Investment Of Chinese Multi-national Corporations

With the speeding up of globalization,the enhancement of reform and opening up, the optimization of the industrial structure,and the improvement of the competitiveness of enterprises in China,the foreign direct investment(FDI) of Chinese multi-national corporations(C-MNCs) is constantly increasing.Domestic markets,resources and techniques have become bottlenecks,restricting economic development.Going abroad can effectively overcome these problems and further enhance the international competitiveness of Chinese enterprises.The development of economic integration and modern technology has greatly reduced the transaction cost,which provides a good external environment for FDI of C-MNCs.All kinds of factors have stimulated the rapid growth of FDI in China,greatly alleviated the pressure on Chinese resources, market and technology,and promoted economic development.However,the present development of C-MNCs has lagged behind.Chinese economy and the efficiency of Chinese FDI is low,which has caused a serious loss of capital and a departure from the initial goal.Therefore,improving the efficiency of C-MNCs FDI is essential now. Based on the characteristics of FDI location distribution of C-MNCs,this study will analyze the main problems and factors influencing FDI of C-MNCs,and some suggestions about how to optimize the FDI location distribution of C-MNCs and the investment efficiency will be put forward.Firstly,the paper will give a positive analysis about C-MNCs FDI from the view of location distribution.In general,the percentage of false investments is great.The industrial structure of FDI has deviated from the comparative advantages,i.e. investments on business services and resources are too much while manufacturing investments has covered too little.The location of investment is also unreasonable and different from the other developing countries,i.e.high investment ratio in developed regions but low in neighboring countries and other developing countries.However, from the view of development,the location distribution of Chinese FDI will be gradually similar as other developing countries with the improvement of market and privatization.From the perspective of sub-regional,the changes in the regional economy directly influence the subject,structure,location selection and efficiency of the C-MNCs FDI.With the transformation of domestic regional economic system,the adjustment of industrial structure,the change of developmental pattern,the location distribution of C-MNCs FDI will also change. Secondly,the impacts of system dependence on the location selection of C-MNCs FDI will be emphasized.The abnormal phenomenon of China's FDI is mainly due to the various distortions in the domestic system,i.e.the large gap between rich and poor increased domestic social risks,and legal imperfections can not protect private property and lead to large capital loss.Discriminatory investment,market access,financing policies and high tax burdens have led to large amounts of capital to escape,and eventually result in a great number of false investments.The government's excessive interference,unfair competitive environment,the long-term overhang of property rights of state-owned enterprises,the prevalence of monopolies have led to survival of the inferior ones;as a result,enterprises lacked competitiveness and industrial structure was unreasonable,and the false investment have been further stimulated.As state-owned enterprises orient Chinese FDI,the special ownership structure,incentives and soft restraint mechanisms lead to the blind decision-making,the distortion of investment industry,the irrational investment location,which ultimately damages the efficiency of investment.On the contrary,when private enterprise orients FDI,such as in Zhejiang,FDI often obeys the principle of comparative advantage,the industry and location distribution are more reasonable and investment is efficient.Therefore,system optimization is the key problem to improve the location distribution of C-MNCs.Thirdly,the law about investment location selection will be summarized based on the extension of Dunning theory.With the development of information technology, international division of work and complication of international environment for MNCs FDI,macro-institutional and cultural factors have become important reasons for FDI. Simple ownership advantages,internalization advantages or local advantages,along with comparative advantage and technological development of the comparative cost advantage,are likely to be sufficient conditions for FDI enterprises.The combinations of investment motivations,investment objectives with the local advantages formed various patterns of investment location selection.For developing countries,the FDI location selection was guided by five principles:proximity principle,the principle of comparative advantage,competing principles,monopolistic competition principle,and transaction cost principle,in which proximity principle and comparative advantage principle are the key principles.Due to the special investor's composition,distorted investment incentives mechanism,the main principles of C-MNCs FDI are monopolistic competition principle and transaction costs principle,which deviate from the normal principle of FDI in developing countries.However,with the improvement of the Chinese market,the FDI location selection of C-MNCs will be gradually reasonable.Finally,suggestions were put forward to optimize the location distribution of C-MNCs FDI.To develop the competitive advantage and the comparative advantage of C-MNCs FDI,and further optimize the structure of investors and industry,we should take measures as following:Improving the market economic system,maintaining a fair competitive market environment,promoting sub-regional industrial structure adjustment and upgrading industrial clusters,changing the traditional economic development patterns and continually improving the ownership advantages of MNCs, which would make the FDI location distribution of C-MNCs more reasonable and efficient.