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 3: Chinese Outward Foreign Direct Investments – Patterns and Explanations

Hinrich Voss

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


Since the instigation of the ‘Open Door’ policies in 1978, China has evolved from a position of marginal relevance for OFDI to become an important emerging country source country. This development is generally argued to have evolved in five distinctive phases reflecting changes in the domestic political and regulatory framework and the Chinese business environment (Wu and Chen 2001; Sauvant 2005; Buckley et al. 2008). Before these phases are described, it is useful to take a step back and consider the following aspects: first, where is China coming from? The following section provides a brief review of China’s economic development between 1949 and 2005 and the reform measures implemented after 1978 to put Chinese OFDI in context. Second, Section 3.2 introduces the key political actors with an influence on Chinese OFDI and with a classification of ownership types in the Chinese corporate system. The knowledge of the political actors and forms of firm ownership helps to understand the impact OFDI policies and regulations which are introduced in connection with the five phases (Section 3.3). The concluding section of this chapter critically assesses the explanatory strength of the academic literature on the development of Chinese OFDI. Based on the identified explanatory gaps and referring to the theories and frameworks introduced earlier, Section 3.4 lays out the research questions guiding the econometric part of this research. 3.1 CHINA’S POLITICAL ECONOMY BETWEEN 1949 AND 2005 To understand the recent growth of Chinese OFDI and some ‘Chinese characteristics’, it is necessary to go back...

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