A Study On The Influence Of Cultural Difference In China's Foreign Direct Investment To The Asia-Pacific Area

China's economy has experienced rapid development and attracted the attention of the whole world ever since the reform and opening up in 1980s. China's outward FDI has undergone a steady increase from 2002 to 2008 and the Asia-Pacific region, which has promised tremendous opportunities for China's FDI, is considered to be the most important investment area for Chinese enterprises. With the development of researches on this topic, cultural difference has become the most influential factors in China's outward FDI, especially when Chinese corporations invest to a foreign country. Hofstede's Cultural Model is cited to analyze the cultural difference among China and other APEC members and the purpose of this thesis is to prove that cultural difference has great impact not only on the choice of investment destination but also on the entry mode for Chinese multinational corporations.Among the 21 APEC members, Singapore, Hong Kong (China), Korea, Japan, America and Australia are selected to make a comparison with China in the five cultural dimensions. According to Hofstede's Cultural Model which is the research basis of this paper, the selected six countries and areas are divided into two groups. One is similar with Chinese cultural background and the other is quite different from that of China. The conclusion of the research is that, most of China's outward FDI has flowed to the former group. So, it is obvious that Chinese enterprises'choice of investment destination is much influenced by cultural difference. As for the entry mode selection, cultural difference plays a very important role as well. Chinese multinational corporations tend to set up wholly owned subsidiaries or embranchments in the foreign market which is of a narrow gap of cultural difference. Conversely, Chinese enterprises take acquisition as their entry mode in the countries whose culture is different from China. In order to reduce the transaction cost caused by cultural difference, joint venture is suitable for building up new corporate culture in a short time.Finally, on the basis of all the analysis, some suggestions are given to Chinese enterprises on their investment to Asia-Pacific region at the end of the paper.