The determinants of China's outward foreign direct investment

Globalisation has led to a rapid increase in the growth of foreign direct investment (FDI) globally. Over the last decade China has become the largest recipient of FDI whilst simultaneously increasing its outward FDI dramatically. The growth in China's outward FDI has attracted little attention from scholars in mainstream research publications. The motivation behind this paper is to investigate the factors driving this growth from both economic and strategic backgrounds. The paper employs panel data analysis covering the period 2003-2009 where we quantify the main drivers of China's outward FDI across a range of variables including bi lateral and multi lateral trade, market size, GDP growth, openness and resource endowment.

► In summary we find that China's overseas investments is attracted to countries with high volumes of exports from China, large GDP per capital and rapid GDP growth. ► Also, China's outward investment is promoted by open economic regimes and resources-rich countries. ► The above explanatory variables suggest that there are clear differences between China's OFDI and that of developed economies.