Research On The Effect Of Institutioanal Factors On Foreign Direct Investment In China At Province Level

Foreign direct investment as an aggregate set of a package of resources, such as management, technology, human resource and financial resource, has an important impact on the economic development and innovation of host countries. Existing researches also show that institutional factors have played an important role in attracting FDI inflows. Since the reform and opening up, China’s inflows of FDI are also closely associated with the government institutions and policies. However, FDI inflows through the analysis of the situation are found unevenly distributed in China, and mostly concentrated in the eastern coastal regions. This paper studies the impact of institutional factors on FDI and implies how to use the system and improve its level of FDI which has important theoretical and practical significance.In this paper, based on current researches, we explore and summarize the institutional factors for FDI mechanism and factors affecting theoretically first. About empirical research, this paper draw from related research, and analyze the factors affecting the process of the various systems deeply by using 11 years of data collected in 30 provinces, cities, municipalities, and autonomous regions. Then, we use Stata to do the statistical and regression analysis and other related analysis were processed. Results of this study are as follows. From the total sample, FDI is not only significantly affected by the market potential, labor costs, infrastructure, but also significantly related to the degree of marketing, policy area, the degree of incorruption, tax burden. However, FDI is not sigificantly related to foreign trade openness, the degree of intellectual property protection, and efficiency of government operations. Comparing the Eastern and the Midwest, there are significant differences on the influential factors. Trade openness and intellectual property protection are significantly positively associated with FDI in the eastern region, but negatively in Midwest.Through the comparative study of the period of 1999-2004 and 2005-2009, a significant positive correlation for intellectual property protection, trade openness and government operating efficiency is not found significant during 1999-2004, but significantly during 2005-2009. Finally, based on the empirical results, the related outcome are discussed and institutional policies are recommended.