China's Foreign Direct Investment Location Choice

Recently,the growth of China Direct Investment Abroad is very rapid, especially after the financial crisis while the global FDI is slowdown. There will be more firms begin or continue their Investment abroad during the Twelfth Five-Year Plan Program (2011-2015). It is of great importance for the firms and the government. The first step of going out is"where"to invest, that is the location choice of FDI. For a MNC, the location choice is not only based on the condition of the firm or the government's policy, but also based on the market scale of the host-country, how far the host-country is from China and also the economic difference of the two countries. Are there any new features of China FDI after the financial crisis? What are the most important influence factors of China FDI? Is there any difference between developed market and developing market when Chinese Firms do their location choice? It's all about China FDI in this paper.This paper intends to examine the effects of the economic determines on the location choice of China FDI. China FDI data for 2006 to 2009 covering 23 countries are used. The PCSE method in panel data analysis is used. Results indicate that market scales of the host-country are negative and significant determinants of FDI. However, when divide the whole data into developed countries and developing countries, results indicate that the scales of the host-country are positive and significant in developed countries. Moreover, the level of trade is positive and significant determinant of China FDI, while the geographic distance is not always negative of FDI. Whether the host-countries sign the Bilateral Investment Agreements with China is not significant determinant of FDI. It concludes that China FDI is still not mature and there is some deference between developed and developing markets.The first chapter mainly reviewed the location choice of FDI in relevant theoretical and empirical analysis of the papers. The second chapter describes and summarizes the history and feature of each stage of China Foreign Direct Investment, also is the location situation of China FDI. In the next chapter, this paper analyzes the factors which will influence the location choice of FDI. After using econometric model to analyze the Gravity Model, this paper concludes the problems of China FDI and gives some recommendations.