Can China’s Outward FDI be explained by general FDI theory?

Abstract: China’s surging OFDI has been a prominent phenomenon since the start of 20th century. As China’s economic growth is widely received as following a unique path, a question arises immediately---does Chinese outward investment also follows a distinctive pattern which can only be explained by special theori¬es? This paper analyzes the determinants of Chinese OFDI by adopting Random Effects FGLS estimation technique using MOFCOM's data on China's OFDI from 2003 to 2009. Our result shows that Chinese OFDI can well be accommodated within established FDI theoretical framework, with market and natural resources-seeking motivations being the major determinants. Our extended specification suggests that China’s OFDI is mainly driven by economic interests instead of political goals.