A Research On The Location Selection Of China’s Manufacturing Outward Foreign Direct Investment

With the background of economic globalization, now China is becoming a leadingcountry of manufacturing, which has the most manufacturing output in the world. In order toenhance the international competitiveness, more and more manufacturing enterprises havedeeply realized the importance of the "going out" strategy and try to make outward foreigndirect investment (OFDI) in the field of manufacturing. At the same time, investment locationshows an increasingly diverse characteristic. Differences of geographical conditions exist inthe world economic development pattern, thus location selection of the host country becomesthe most important factor in outward foreign direct investment. The correct location choicewill improve the spatial efficiency of manufacturing outward foreign direct investment, aswell as obtain the best investment return. Consequently, our country should attach importanceto the problem of how to analyze and choose a host country more scientifically to boost thehealthy, steady and consistent development of outward foreign direct investment, as well assolving it.The topic of this paper is based on the status of China’s manufacturing industry as well asdomestic and international environment of outward foreign direct investment. Afterresearching the existing theories of outward foreign direct investment which containinglocation selection，the writer classified the theories and then, sum up the different motives ofChinese manufacturing OFDI in reference to the World Investment Report. This paper alsoanalyzes the possible factors which may impact the OFDI location selection. In the part ofOFDI layout status, the writer cites large amounts of OFDI data to identify the tendencychange in stocks and flows, worldwide distribution, as well as existing problems inmanufacturing OFDI location selection. Empirical analysis is based on2007-2012data ofChina’s investment in five major economies, using econometric panel data model to researchthe factors which affect manufacturing FDI location selection. The regression results indicatethat the host country wages, economic scale, the bilateral trade volume, the level ofinfrastructure, technology, degree of economic freedom. Geographic distance is a factorwhich can affect Chinese manufacturing OFDI location selection, but the impact is weakening.While the influence of exchange rate factor in manufacturing location selection is not significant. For labor resource-rich country, OFDI focus more on wage level and market size;for natural resources-rich country, OFDI focus more on infrastructure the degree of economicopenness; for technology-rich country, technological level is the key factor in manufacturingOFDI location selection. Finally, this paper put forward effective countermeasures andsuggestions on how to choose China’s manufacturing outward foreign direct investmentlocation scientifically from country level and enterprise level.