China Foreign Direct Investment Location Decision

With the economy developing rapidly, our country has become a trade and economy giant, but its outward foreign direct investment (OFDI) starts quite late, which leads to the unreasonable location choice. Under the circumstances of international finance crisis currently, the capital is especially precious, thus it is essential to find out a method to carry on regional investment decision-making reasonably and use the capital effectively.Based on the international trade theory, the international direct investment theory, the location theory and the gravity model, this article attempts to inquire about the primary factors that affect the strategy of foreign direct investment made by domestic enterprises via combining the with the empirical research.Started from four dimensions:host country, investment country, investment subject, mutual connection between host country and investment country, this article analyzes the primary factors which affect the OFDI from our country to the host country by qualitative analysis. Then the author builds the econometrics model based on gravity model, and collects the annual data about current capacities and storage quantity of FDI of our country to 98 countries. On the basis of this, this paper examines the influencing direction and degree of these factors imposes on the location choice in OFDI.The multi-dimensional linear regression result indicated:OFDI in our country relies on the ability of domestic economical supplies and the market demand scale of host country; in order to make full use of relatively monopoly superiority and small-scale technology characteristic, the domestic companies inclined to invest directly to the countries with lower economical development level; the geography distance means cost and difference, which will create certain hindrance for OFDI; the trade and the investment have supplementary relations, and the trade antecedence can make clear the situation in host country which will reduces the uncertainty and risk of OFDI; the domestic enterprises pay special attention to the resources of African countries and the geography relations and cultural similarity with East Asian as well as Southeast Asian countries, but they do not have enough ability and motivation to make FDI to developed countries.Finally, the article proposes serials suggestions to the enterprise and the government based on the summary of theoretical analysis and the results of empirical study, then put forward the future research direction.