The Determinants of Location Choices of China’s ODI: Institutions, Taxations and Resources
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| Title | The Determinants of Location Choices of China’s ODI: Institutions, Taxations and Resources
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| Author | Wang Yongxin, Du Julan and Wang Kai |
| Organization | China Center for Economic Studies, CCES；The Chinese University of Hong Kong |
| Email | yongqinwang@fudan.edu.cn；julandu@cuhk.edu.hk； |
| Key Words | China, ODI, Institutions, Tax, Resources |
| Abstract | China has become the third largest source of outward direct investment (ODI). This paper studies how institutions in the host countries affect the location choices of China’s ODI. Based on a deal-level sample from 2002-2011 covering 209 countries, this paper empirically tests how political institutions, political stability, government effectiveness, regulatory quality, rule of law and corruption control in the host countries affect the location choices of China’s ODI. On top of these institutional factors, we study the effects of tax evasion and natural resources in host countries, and their interactions with the institutional factors. We find that political institutions in the host countries are not major concerns of the ODI, while government effectiveness, regulatory quality, and corruption control have significant effects on the locations of ODI. And China’s ODI tend to avoid countries with strict legal system. Tax evasion and resources are also major motives of China’s ODI. General institutional quality and tax evasion are substitutes in China’s ODI location decisions. |
| Serial Number | WP730 |
| Time | 2014-10-14 |
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