A Study on the Location Determinants of the US FDI in China

Abstract

he US foreign direct investment in China plays a leading role in the process of introducing FDI to China. This paper carries on an empirical research dynamically on the location factors of US foreign direct investment in China, adopting Johansen cointegration test, the VEC model, Granger causality test and variance decomposition technology, based on analytical data in the period from 1983 to 2006. The studying result demonstrates that there is a stable relationship among the US foreign direct investment in China, China’s GDP, fixed asset investment in China and the prophase stock of the US foreign direct investment in the long-run. And China’s GDP is the major power to induce the US FDI to bias the long-term equilibrium.