Chinese Outward Direct Investment

It has been more than ten years after the Chinese government implemented the Going Out policy, obviously, this policy is successful as the performance of Chinese outward FDI experienced great development since then, which has gained extensive attention from all over the world. As the economy globalization moved with the deepening development of technology and transportation, the global value chain segmented subtly and widely. The economic integration of China has deepened production fragmentation in the world, especially in East Asia. Is Chinese outward investment influenced by these trend? In the production specification, MNCs from advanced countries who gain the most profit from global value chain, play absolute leading role to organize the global production network by their advantage in management and technology. So do Chinese corporates also have the OLI advantage in traditional theory of FDI? Do they play the same role as the MNCs of developing countries do in the global value chain? What is the real motivations that drive them to go out? These are what this paper focus to discuss and finding answers. Therefore, this paper will explain the characteristics motivations of Chinese ODI and through the angle of Global Value Chain theory. Although it’s hard to judge motivations of Chinese MNCs directly, we can detect them through the relationship of ODI and International trade, as ODI caused the changes of International trade, and ODI with different motivations can lead to different effects of International trade, we should firstly ravel out the principle of ODI effects on International trade, then we can use an empirical way to demonstrate trade effects and then judge the ODI motivations.Based on the theory of Global value chain, this paper firstly reviewed the theory, and then analyzed the participant methods of corporates in Global value chain; it summarized the proper motivations of Chinese MNCs under the background of product sharing. As ODI can cause the change of International trade, it gave explanation of the influential mechanism of ODI effects on trade. Then it outlined the development stage of Chinese ODI, and characteristics of Chinese ODI, and tried to give explanations for these traits and primarily come up with the judgment of motivations. Then it sculptured the figure of ODI and Chinese International trade of different goods, in order to support the relationship between the two aspects. After the description, it used an empirical model, the modified gravity model, to demonstrate the previous suppose of the motivations, to find that the four majorly motivation that drive Chinese enterprises to go out are:searching for strategic assets, promoting the trade of commodities, exploiting natural resource and extending overseas markets. Among them, the strategic asset is one of the most important motivations for Chinese MNCs to enter developed countries. Moreover, the motivation of efficiency is not brilliant for the moment, but will become important with the growth of Chinese labor price. Finally, it gave out suggestions of promoting healthier outward direct investment for Chinese enterprises.To view the activities of Chinese outward direct investment from the angle of global value chain may help us to understand the difference of Chinese with other developing and developed countries, and it’s also an important way to understand the route for Chinese corporates to improve their competence in the global economy and to climb along the value chain in order to capture more value with less cost, which is the final objective for China to lead the industrial upgrading reform.