The Determinants of Chinese Outward Direct Investment

The Determinants of Chinese Outward Direct Investment

New Horizons in International Business series

Hinrich Voss

The rapid international expansion of Chinese enterprises since the 1990s has attracted considerable attention in scholarly and policy circles. This book sheds fresh light on the phenomenon by explaining its determinants using the analytical lens of international business theory.

Chapter 2: Internationalisation through Foreign Direct Investment – Stylised Facts and Theoretical Explanations

Hinrich Voss

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics


This chapter provides the context and theoretical frameworks for the analysis of Chinese outward direct investment (OFDI). First, an overview of global development of foreign direct investment (FDI) since the 1970s for both developed and developing countries is provided to place Chinese OFDI and the growth of Chinese multinational enterprises into context and to help understand the significance of their recent growth. Second, theoretical models explaining FDI from developed countries and MNE behaviour and strategies are critically introduced. Third, they inform the development of a framework that explains the determinants of Chinese OFDI. 2.1 GLOBAL FOREIGN DIRECT INVESTMENT PATTERN AND DEVELOPMENT This section reviews global FDI outflows and relates the growing position of developing country OFDI and MNEs to developed country OFDI and MNEs. This is followed by a similar review of global FDI inflows to place the former in context. In both sections, China’s rising position in recent years is highlighted. A more detailed account of Chinese OFDI is presented and discussed in Chapter 3. 2.1.1 The Global Development of Foreign Direct Investment Worldwide FDI flows have increased dramatically since the 1970s when the United Nations Conference on Trade and Development (UNCTAD) first published data on FDI. While the total amount of worldwide FDI outflow during the 1970s stood at an annual average of USD 28.26bn, it rose continuously during the 1980s to an annual average of USD 93.32bn and quadrupled to an annual average of USD 418.97bn in the 1990s (UNCTAD 2010a) (see Table 1.1). Annual flows of...

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