Edited by Huiyao Wang and Yipeng Liu
Chapter 5: Outward Foreign Direct Investment by Chinese firms: the case of Changzhou
Given the high level of international activities of Chinese firms across the globe, it’s logical to begin a scientific inquiry of this phenomenon with its antecedents, followed by its consequences. Our data are drawn from the 2008–2010 survey of all firms located in the National High-Tech Development Zone, conducted by the Chinese Ministry of Science and Technology. We estimate the determinants of the OFDI of Chinese firms by including the major independent variables such as high-tech intensity, human capital acquisition and institutional factors while controlling various firm characteristics. Our results of the fixed-effects model have shown some interesting patterns of OFDI determining factors. Among the significant determinants of OFDI, number of Chinese returnees in the firm seems to be more important than tax reduction policies. Furthermore, the effects of the Chinese returnees are stronger in all kinds of non-state-controlled firms than those in the state-controlled firms. This is probably not surprising since the Chinese returned who were trained in the Western countries understand the product market, labour market, financial market, language and business culture, trade laws in both China and Western world. Their unique skill sets and valuable knowledge serve as an important catalyst for the OFDI and internationalization of Chinese firms. There are a number of significant policy implications of our findings.
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