Quantitative and Dynamic Analysis of the Oli Variables Determining Fdi in China

The main determinants of foreign direct investment in China are analyzed quantitatively and dynamically based on Dunning's eclectic theory and empirical models corresponding to location-specific advantages, ownership-specific advantages and internalization advantage. More specifically, the correlation between each OLI variable and FDI is tested and explained in detail. It is concluded that monopolistic advantages of technology and management experience of foreign investors along with China's low labor cost and great market potential might be important factors attracting FDI in China. In addition, using an internal market to establish a network of international production might also be an important determinant for foreigners to directly invest in China. Others might include searching for attractive yields available in equity investment, devaluation of the Chinese currency, distance, culture and global business strategies.