China's Outward Fdi

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1.0 Introduction
1.1 Background
China is integrated rapidly with the world economy by increasing its foreign investment linkage with other countries. In 2005 China was the 4th largest investor among emerging markets, up from 14th in 2004 with 72.4% of all economies in the world receiving Chinese FDI. China’s direct investment both inward and outward FDI provides important net long-term economic benefits for both home and host countries. In the past two decades, outward FDI from China increased by nearly 300%. According to the special report of TNCs and Canada-China FDI, the development of China’s outward FDI can be classified into two stages: (1)1982-2000, spontaneous stage, and (2) 2000-current, government-oriented stage. Starting from virtually no ODI in 1979, the initial outward FDI flows from China are few and mainly for establishing offices and agencies in other countries. In 1990s the FDI flows grew increasingly volatile. In 2005 China was the 4th largest investor among emerging markets, up from 14th in 2004 with 72.4% of all economies in the world receiving Chinese FDI. The annual growth rate was 19.7%, which was much higher than that of GDP. Based on the results of the work of the OECD investment committee, China’s ODI flow and stock stands as the 4th and 6th largest respectively among developing countries. The Chinese outward FDI has risen to 56.53 billion in 2009. The first section of the study encompasses an introduction of three collaborated sets of FDI determinants—economic conditions, the regulatory framework and investment promotion. Section two outlines the features of FDI outflows as the overall FDI scale, the target sectors, the geographic distribution and the concrete ways of outward FDI of China as exemplified by the affirmative data. Section three summarizes the findings and sketches some reflections about concrete actions to further the spread of FDI outflows in a properly arranged business-led agenda. Accurately describing the nature of China’s investments abroad is a challenge. A significant share of Chinese investments is directed through tax havens, making it difficult to discern the ultimate destination of those funds. Different countries also employ different definitions of foreign direct investment, creating comparability problems. In addition, statistics released by the Chinese Ministry of Commerce (MOFCOM) and the State Administration for Foreign Exchange (SAFE) reflect government-approved investment projects rather than actual money transfers. Projects that do not receive official approval therefore do not show up in Chinese statistics or in international ones, since most international statistical compilations, such as the World Investment Directory compiled by the United Nations Conference on Trade and Development (UNCTAD), rely on MOFCOM statistics. Year-to-year changes in FDI definitions or in reporting practices in some countries also make it difficult to look for trends even in Chinese FDI practices in a single country.

1.2 Research Problem
Identifying the various factors influencing the outward FDI flows of China. 1.3 Research Question
With the core intention of understanding factors influencing the outward FDI flows of China and analyzing the reasons behind this, the paper comes up with the following key research questions: 1) What is the current scale of outward FDI flow of China? 2) What are the target sectors of outward FDI flow of China? 3) What are the key factors dictating the outward FDI flows of China? 4) What is the role of the State in China’s Outward FDI? Which policies, if adapted, will instill a more efficient and effective outward FDI of China? 1.4 Research Objective

1.4.1 Broad Objective
To understand the current scenario of the outward FDI flows of China in order to uncover possible factors influencing this. 1.4.2 Specific Objectives
1) To analyze the current scenario of outward FDI flow of China 2) To analyze the key factors dictating this...
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