An Empirical Analysis Of China’s OFDI Determinants And Countermeasures In Latin America

Along with the economical globalization thorough, international direct investment has become unceasingly active, and more and more multinational corporations intend to penetrate and extend overseas, and to achieve globalization management through it. Traditional international direct investment activities led by developed country have changed, with the development and richness of the theory of direct investment in developing countries, developing country like China is also actively carrying out foreign direct investment. In recent years, deepening of economic globalization and China’s comprehensive national strength provide a good international environment and a strong endogenous impetus for China’s "going out" strategy, which promote the rapid development of China’s foreign direct investment. According to Commerce Department’s statistics, in2012, China’s foreign direct investment reached US$84.22billion, ranking the third in the world. And Latin America, as China’s second largest FDIs region, has its own unique character. In2012, China’s non-financial direct investment in Latin America was US$10.61billion, rose4.8%, accounting for13.8%of total nonfinancial foreign investment of China. However, the investment is still in the primary stage, there are still many problems which cannot be ignored in the size and structure of the investment, so it’s necessary for us to study this issue.This paper is divided into six parts, the first part briefly describes the significance and research methods of this topic. The second part reviews the theories of foreign direct investment in developing countries, and classifies on the review of previous studies, which instruct the investment in developing countries. The third part, an important section of this article, firstly analysis the size and structure on the current situation of China’s direct investment in Latin America, and further discuss the main motivation of direct investment in Latin America. The fourth part is the research priorities, selecting different variables and China’s foreign direct investment flows to the major Latin American countries from1998to2012, using multiple regression analysis, it derives the main influence factors, like host country GDP, host country resources sufficient allowance and investment country’s total export to host country. The fifth part, based on the main summarized problems, puts forward practical and operational measures for China to carry out investment, and even provides a reference for China’s FDI to Latin America and other developing regions. The last part of this article conducts a general summary that China should continue the investments in Latin America region.In research methods, this article synthetically uses a variety of analysis method to set out a comprehensive and scientific exposition. It uses quantitative analysis and comparative analyses to summarize the current situation and motivation of China’s direct investment in Latin America. Then, multivariate regression model analysis is used to interpretate the significance of various influencing factors. Finally, from the standpoint of normative analysis, it proposes practical countermeasures and suggestions.There are two main innovation points of this paper. The first is that the paper comprehensively analyses the motivation of China’s direct investment in Latin America according to traditional and newly developing countries, direct investment theory, including not only the well-known resource development-seeking, market development-seeking and preferential policies-seeking motives, but also industrial gradient transfer-seeking motive. The second is that multivariate regression model is used to examine the factors’impact on FDI, the paper overcomes the difficulties of data collection, draws on extensive literature about China OFDI to Asia, Africa and other developing regions, and selects the appropriate variables to elaborate on the issues. However, this article also has insufficiency, such as partial absence of OFDI data. Also, the empirical analysis does not examine the FDI of "Tax Havens", subject to data absence, and only seven countries in Latin America are selected.