• Journal of Korea Trade
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• v.24 no.1
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• pp.35-58
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• 2020

Purpose - This study examines the determinants of foreign direct investment (FDI) location choice for Chinese firms, focusing on the agglomeration effect for firms of the same nationality. Design/methodology - The empirical data are China's inward FDI from the top 19 economies (excluding tax havens and Taiwan) in terms of FDI during 1997-2015 and China's outward FDI from the top 18 economies (excluding tax havens). This study uses a random effects generalized least squares model for panel data analysis. Findings - The results confirm that both host countries' costs and market conditions and the degree of agglomeration affect these countries' attractiveness for FDI inflows. Specifically, agglomeration has a significant effect on China's inward and outward FDI. This study confirms that the agglomeration of firms of the same nationality has predictive power for multinational enterprises' FDI location choices. The host countries' real GDP and trade openness also positively affect FDI inflows. Interestingly, however, China's production cost has a positive effect. Thus, inward FDI aimed at entering the Chinese market is increasing in recent years relative to the previous efficiency-seeking FDI. Inward FDI in China is therefore the market-entry type, whereas outward FDI by Chinese firms is the market-oriented type. Originality/value - These results suggest that the effects of the potential determinants of Chinese outward FDI are similar to those of inward FDI as China's trade liberalization progresses.

• Korea Trade Review
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• v.44 no.6
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• pp.345-361
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• 2019

In recent years, Chinese firms have explosively increased outward foreign direct investment (oFDI). While state-owned enterprises (SOEs) are still dominant in Chinese oFDI, privately-owned enterprises (POEs) are also accelerating their internationalization. These two types of Chinese firms differ in their behavior regarding oFDI. The objective of this paper is to analyze the differences in the choice of oFDI locations between Chinese SOEs and POEs by considering host country factors. By integrating the literature on Chinese firms' oFDI and on FDI locations, we developed six hypotheses concerning how host country factors affect their choice of location. We tested our hypotheses by conducting multiple regression analysis with recent secondary data on 413 Chinese MNEs in 88 countries between 2005 and 2016. The results of the test show that in selecting oFDI locations, Chinese SOEs invest relatively more in countries with richer natural resources, more abundant strategic assets, less production efficiency, higher political risk, and lower institutional quality compared with Chinese POEs. It is our hope that the empirical results of this paper will contribute to research on Chinese oFDI.