The Research On The Impacts Of Economic Freedom Differences On China’s Outward FDI Location Distribution

The location distribution of China’s outward FDI is affected by many factors,among which whether differences of economic freedom between China and the hostcountries impact on the location distribution of China’s outward FDI and how theyaffect the location distribution of China’s outward FDI are problems worthy of studyand discussion.Firstly, through analyzing the status quo of the differences of economic freedombetween China and the host countries and the location distribution of China’s outwardFDI, we found the differences of economic freedom between China and different hostcountries are not the same, and the location distribution of China’s outward FDI showsseverely unbalanced. Based on this, we preliminary thought that the differences ofeconomic freedom between China and the host countries have a negative effect on thelocation distribution of China’s outward FDI from the data level. Secondly, afterapplying the model of the international capital fact flow to analyze the internalmechanism between these two elements, we found the differences of economicfreedom are important factors which affect the location distribution of China’soutward FDI. The greater the differences are, the less China’s direct investment on itis, whereas the opposite. Whether this general theory mechanism is also applicable toChina needs further exploration and validation. Once again, we used the related dataof40countries (regions) from2003to2009for empirical analysis of panel data. Theresult showed that differences of economic freedom in the overall and the locationdistribution of China’s outward FDI have negative correlation. The differences oftrade freedom and financial freedom have the greatest impact on it. China’s economicfreedom are different with the host counties and the difference varies, resulting in thelocation distribution of China’s outward FDI showing the characteristic that China’soutward FDI transfers to the regions which is similar to China on economic freedom.Finally, in order to promote the development of China’s outward FDI and its balancedlocation distribution, we make targeted policy recommendations. From the enterpriselevel, at present for the enterprises preparing for "going out", more prudent approachis to select countries (regions) with similar economic freedom to China. From thegovernment level, for the long-term development of the nation our government shouldcreate a healthy and good economic institutional environment, and improve trade freedom and financial freedom step by step according to the specific situation, thusincreasing China’s outward FDI on Europe, America and other developed countries(regions) and promoting the location distribution of China’s outward FDI developingbalanced and harmoniously.