The Impact Of Financial Factors Of OFDI

China has been strongly pushing on the "gonging out" strategy since we entered the WTO in 2001. The country’s OFDI started to grow fast and China become one of the countries with highest OFDI strength At the same time, the domestic financial market is also in the process of development toward more perfect and mature. Bank credit market, the bond market and the stock market are on the fast way to improve through combining the advanced international experience with its own characteristics. In addition, there are significant differences of outward foreign direct investment among different regions in China. We also find that there exist a big gap in financial market development degree among provinces, and it is hard to balance the financial resource allocation between different regions. So a research on the effects of financial factors on China’s outward foreign direct investment based on the difference among provinces shows significant theoretical and practical value.Firstly, this paper makes a detailed analysis of the regional differences in characteristics of China’s foreign direct investment from different aspects by using abundant statistic data from 2003 to 2012. In the theoretical analysis part, I seek the basic association of outward foreign direct investment and financial factors starting from the essence of foreign direct investment. Then I discuss the two core channels through which financial development impact foreign direct investment, that are the demand of financing and the demand of risk management. Gong a step further by dividing financial support into commercial financial support and policy financial support, this paper builds a financial ownership advantage analysis framework of the enterprise along the thinking of research of Keynes’s "double gap theory" developed for studying the national income. I find out the macro path through which the financial factors influence China’s outward foreign direct investment in theory. Based on the strong theory, a pragmatic empirical study of the relationship between China’s outward direct investment and financial development factors is done. Financial development factors include the financial development depth measured by the proportion of loans in GDP and the marketization degree of credit funds allocation measured by the private credit ratio.The empirical research of all the provincial panel data using province fixed effects shows that there is a significantly positive correlation between the two variables that represent the financial development factors and foreign direct investment. Then I divide the whole data sample into three parts, the eastern, central and Western sub sample. The comparison of regression analysis reveals that the connection between financial development and the OFDI is still significant, while the influence degree standard by the coefficient size shows significant difference among the east, middle and west part of China. In addition, I divide the sample According to the average level of foreign direct investment in the paper. The result got from this empirical analysis still confirms the influence of financial development factors on overseas direct investment, and the effect show great disparity. The result of this paper also proves traditional variables, such as economic development level, level of exports, inward foreign investment level and the level of savings, have significant positive effect on China’s outward direct investment, but fails to find distinct evidence for technology improvement playing a role in the development of foreign direct investment.