Research On Wholly Foreign-ownership From Views Of Latent

Foreign investors has mainly experienced three stages to enter Chinese market:cooperation with the native enterprises,creating joint venture and establishing wholly foreign-owned enterprises(WFOE).In recent years,establishing WFOE has become the most common way for multinationals' foreign direct investment.Increasing number of joint ventures were turned into wholly foreign-ownership.However,as many cases of corruption,bribery and hiddle transaction were revealed in joint ventures recently,peolpe began to think about the influence of “Hidden Rules” and what it brought to the trend of sole proprietorship in foreign investment.Sole proprietorship in foregin investment will bring a series of bad effects.On the one hand,the value of China's outstanding talent could be used by foreign investors,on the other hand,accelerating the monopoly of foreign investment in the market.Some foreign investors even use the opportunity to achieve profit transfer and tax arbitrage.Under this circumstances,this paper firstly introduce the root and nature of“Hidden Rules”.Then,by futher studying the transmission mechanism of the "hidden rules" in the market,we analyze what the competitive selection is and how evolutionary replication eventually forms a gray "hidden rules" of the system,from which we can see how Gresham's Law is achieve through “Hidden Rules” between enterprises.At last,based on the panel data of China's FDI during 2003-2015,we find significant positive relationship between “Hidden Rules” and sole proprietorship.The spread of “Hidden Rules”transaction make multinationals prefer to enter Chinese market by single proprietorship in order to reduce the cost of management and institution.Therefore,this paper will introduce the whole process of how “Hidden Rules”is appeared,developed and finally evolutioned.We will povide empirical evidence to improve the “Hidden” environment of foreign ivestment and inhibit the adverse effects of Wholly foreign-ownership.