An Empirical Analysis of the Institutional Factors’ Affection on China’s Foreign Direct Investment

With the rapid development of economy, China, as a country which attracts lots of multinational companies investing in and reaping their benefits, now plays an increasing important role as a source of investment all around the world. And more and more Chinese enterprises try their best to expend overseas market. In this paper, based on the perspective of investment motives, I use fixed effect model to study the influence of domestic and the host country institutional factors on outward foreign direct investment (OFDI) with the panel data from 58 Chinese OFDI destinations during 2003-2012. The results show that it’s the domestic institutional factors not the host country’s that play a major role in OFDI, especially property rights in legal field and investment freedom and business freedom in economic field which all have negative effects on ODFI, fiscal freedom and monetary freedom in economic field which all have positive roles.