The Research On The Motivation Of China’s Foreign Direct Investment By Capital Knowledge Model

With the deepening of economic globalization and the need of China’s economicdevelopment, foreign direct investment has become one of the driving forces of China’ssustained economic development. Foreign and domestic scholars had done rich researchon foreign direct investment, however, for the motivations on China’s foreign directinvestment, especially empirical research is relatively small. based on the achievementsof existing research, the thesis selects knowledge capital model as the basic theory, usespanel data model as analysis tool, according to the situation of China’s foreign directinvestment and the availability of data, we select50countries and regions in2003-2010the stock data of China’s foreign direct investment as a research object, then analysis themotivations of China’s foreign direct investment (horizontal or vertical type).For in-depth research, the total sample is divided into two sub-samples as developedcountries and developing countries. We find the results as followings: Firstly, in the totalsample, we get that China’s foreign direct investment appears vertical features; Second,we find that our country presents horizontal features in developed countries and ourinvestment in developing countries show significant vertical features. At last, we reviewthe total sample and find a rule that the scale of China’s foreign direct investment isdirectly proportional to the sum of bilateral GDP,bilateral skilled labor endowments,thesquare of the difference of the GDP, home trade cost，it’s inversely proportional to theproduct of bilateral skilled labor endowments and the square of the difference of theGDP, the distance of the two countries, host trade cost.On the basis of analysis above, our thesis gives policy recommendations asfollowings: we should actively expand our scale of economies and increase our skilledlabor endowment; we should adopt different investment strategies for developedcountries and developing countries, we may guide foreign direct investment by policiesin China; We should strengthen cooperation between the countries or regions, andactively set up bilateral or multilateral economic cooperation agreement or trade zone.