Empirical Analysis Of Determinants Of EU FDI In China

As China’s largest trade partner in the world, EU (European Union) plays an important role of direct investment to China. Since China’s reform and opening up to the outside world, EU’s direct investment to China has grown fast and gradually blossomed. While, Europe Union’s direct investment in China is different from that of the US, Japan and other regions and countries. Therefore, the determinants would also be much different. What are the main determinants which have affected the EU’s direct investment in China? That’s the problem this paper attempts to resolve.This paper, based on International Direct Investment Theory, aims to find the determinants of EU FDI in China and provides suggestions for the government and enterprises. With the relevant statistical data of1986-2009as the analytic base, an econometrics model is employed to identify the determinants of EU FDI in China empirically, based on theoretical analysis. Through empirical regressions and tests, this study identifies some positively significant factors including recipient’s GDP, RMB exchange rate and government’s policies, while EU’s enlargement is negatively significant. The findings from this study provide important implications for policymakers and business practitioners.