Influence Factors Of Location Choice On Foreign Direct Investment In Real Estate

With the development of regional economic integration and the globalization of the world economy, the FDI (Foreign Direct Investment, abbreviations for FDI), which is mainly based on multinational companies, plays an increasingly important role in the world economy. The entry of foreign capital can not only promote the economic development, but also improve the management level and industrial upgrading of the host country. All these advantages have become a consensus among the academia. Therefore, analysis of the motives of FDI became a hot topic of theoretical research, on which could explain the location choice of FDI. However, with the continued deepening of economic globalization and regional economic integration nowadays, the international competition among various enterprises became more intense, the motives of location choice of multinational corporations became more complex, thus lead to a new space distribution feature of FDI. Namely, highly aggregate in sub-national level, or some even lower provincial levels. This phenomenon could not be sufficiently explained just by the traditional theory of international economics. Meanwhile, FDI has entered into a wide range of industries, which somehow, makes the general research result of traditional location choice of foreign investment become hardly convincing.The real estate industry is the pillar industry of our country. The entry of FDI has had a major impact on the real estate industry, and thus further on influence China’s overall economic situation. Through investigation, we found that the FDI distribution in China’s real estate industry is highly uneven. The eastern area introduces a comparably larger amount of foreign capital, while in some western provinces there are few entries of foreign capital. Because the chain length of the real estate industry is long, for there are plenty of up stream and down stream industries, China’s regional economic difference would be further expanded due to the uneven distribution to some extent, which is contrary to the concept of governance and good economic development requirements of our governments.This paper selects the real estate industry, which is based on a large number of previous literatures, combined with new economic geography, industrial economics and regional economics theory and related to the industrial characteristics of real estate industry, discusses the real estate industry of FDI location selection from a new angle. It conducts a research on the effects of location choice of China’s real estate industry from both theoretical and practical aspects, and also carries on a multidirectional inspection on the space difference of FDI. Through the detailed research, we wish to discover some deep regularity features of FDI location choice, and get some valuable theoretical findings and policy suggestions.Theoretically, this paper aims at identifying the major effects of FDI location choice which could correspond with the research reality and be widely recognized by experts and scholars mainly by reviewing a large number of theoretical and empirical literatures. Those6effects are as follows:the level of economic development, the combined effect, wage level, the openness, the level of infrastructure and the location factors. On this basis, this paper explores the affects of the direction and extent of various factors on FDI location choice through the study of real estate, combined with the characteristics of the real estate industry itself add to the price of land. After finding out those6factors, this paper then had the empirical test by using1999-2009panel data of China’s28provinces and cities to build the model analysis. Firstly inspect from the national level, and then analyze on eastern, central and western regions to identify the main influencing factors respectively, and then proceed a comparative analysis on the test results. According to the result, in terms of overall and three regional agglomeration factors, payroll factor, and land price is the most important variable. In addition, the infrastructure is a very important variable for the eastern and western areas, while to the western, the level of economic development is a very important variable. Which indicating that the primary reason for the low attraction of foreign investment of the western region is the low level of economic development. It is only the higher level of economic development which could further attract foreign investment.Finally, based on different impact factors of FDI on the nation and three regions, this paper engages in profound thought on attracting investment strategy under the new situation, combining with the results of empirical analysis in this article and put forward some suggestions---In order to promote the coordinated development of regional economics, our local governments should adjust the industrial development strategy, and strengthen the supervision and guidance on the process of foreign capital thereby to take more effectively use of foreign capital resources to improve our country’s overall strength.