The Research Into The Influence Of Host Government Transparency On China’s Foreign Direct Investment

Host government transparency plays a very important role in internationalinvestment. but previous studies in the analysis of China’s foreign direct investment,is more concerned about of the role of market size and resource endowments, and lackof analysis on the effect of host government transparency on outward foreign directinvestment. Theoretically, the host government transparency degree correlates withforeign direct investment positively, but in reality, China’s non-financial overseasdirect investments flow to some high political risk countries.Based on this background, this paper reviews literatures on host governmenttransparency and foreign direct investment. Then the second chapter describes andanalyzes the development process, types, distribution of China’s outward foreigndirect investment(OFDI) and the degree of host government transparency. The secondchapter theoretically analyzes the positive and negative effects of host governmenttransparency on China’s OFDI. On the one hand, a clean government will reduce theextra cost and uncertainty of multinational companies. The host governmenttransparency may attract foreign direct investment. On the other hand, a corruptgovernment is likely to accelerate the approval process and bring in additionalrevenue. The host government transparency may reduce OFDI. Specifically, this paperdiscusses how host government transparency affacts Chinese resource-seeking,market-seeking, technology-seeking OFDI. From a quantitative point of view, I usethe panel data of72countries from1995to2010, empirically analyzes the effects ofhost government transparency on China’s OFDI. Unlike most empirical results ofdeveloped countries, the results of this article show that China’s OFDI and the hostgovernment transparency are significantly negatively correlated. Further more, byusing cluster analysis of the sample countries, I find that the effects of hostgovernment transparency on the China’s three kinds of OFDI are different from eachother, as the investment motivations are different. Regression results of OLS, FGLSshow that Market-seeking OFDI correlates with the host government transparencynegatively but not significantly, Resource-seeking OFDI and the host governmenttransparency are significantly negatively correlated. However the technical-seekingOFDI correlates with the host government transparency positively. They are mainlydue to the feature of investment motivations. Finally, based on the previous analysis, this thesis puts forward specific policy recommendations.