Empirical Study On The Determinants Of Intra-China FDI Before And After The Onset Of Euro Crisis

Since1978, China’s economy has benefited a lot from the implementation of thereform and opening-up policy. Complying with the trend of international industrialtransfer, China has taken a good advantage of its huge potential consumer market as wellas cheap labor to attract foreign businesses around the world. In particular, China hasexperienced a phenomenal surge in its inflow of foreign direct investment (FDI) after itsaccession to WTO. It is for the first time in2012that China surpassed the United States tobecome the world’s largest FDI destination country.However, after the onset of euro crisis, the global economy has tanked and been ingreat recession. And the domestic economic growth has been slowing down. Not only thesharp drop in demand but also the pressure of RMB appreciation suggests us there must besome changes in economy. For instance, the labor cost advantage, once was a priority toinvestors, now is at stake. Although the actual amount of the use of foreign directinvestment has been increased year by year, it is still a problem that whether theattractiveness will sustain and grow.The aim of the article is to analyze how the FDI determinants influence intra-ChinaFDI flow. In this paper, some panel data of38countries from the first quarter of2002tothe first quarter of2012has been used, and choosing indicators including GDP, trade,distance, the protection of intellectual property and many other factors. With the latest data,integrating theories of FDI and gravity model, using the panel data model, the authorempirically make analysis on China FDI inflow.The results appear to corroborate the view that an increase in IPR has a significantlypositive effect on China FDI inflow, supporting the hypothesis four whereas theconfidence, trade, infrastructure may not have such strong effect on FDI decisions. Theresults also indicate that GDP has a beneficial effect on the intra-China FDI flow. Andalthough the distance coefficient is positive, witch is quite opposite to the hypothesis four,the result show distance may comply with proximity-concentration theory. The findingsendorse the recommendation that we can gain more FDI inflow by strengthening IPR.