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Empirical study on location choice of Chinese OFDI

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  • Ren, Xiaoyan
  • Yang, Shuili

Abstract

China's outward foreign direct investment (OFDI) flow has shown steady growth, from US$2.85 billion in 2003 to US$196.15 billion in 2016, increasing by 68.8 times. This study measures national distance from five dimensions—geographical distance, cultural distance, institutional distance, economic distance and informational distance—for Chinese OFDI. Taking 2006–2016 as the time window and national distance as the perspective, the study looks into the location choice of Chinese OFDI by using an OFDI size determination model. The results show that geographical distance, economic distance and informational distance will significantly promote Chinese OFDI, while institutional distance will restrain it, and cultural distance will not have a significant effect on Chinese OFDI. In addition, Chinese OFDI has strong natural resource-seeking motivation. In order to obtain natural resources, Chinese enterprises will overcome geographical distance and cultural difference to conduct OFDI in the countries far away from China.

Suggested Citation

  • Ren, Xiaoyan & Yang, Shuili, 2020. "Empirical study on location choice of Chinese OFDI," China Economic Review, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:chieco:v:61:y:2020:i:c:s1043951x20300250
    DOI: 10.1016/j.chieco.2020.101428
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