Abstract

China is integrated rapidly with the world economy by increasing its foreign investment linkage with other countries. In 2005 China was the 4^th largest investor among emerging markets, up from 14^th in 2004 with 72.4% of all economies in the world receiving Chinese FDI. Through outward FDI into any sectors, industries or regions, there should be intra-industry productivity spillovers from foreign firms to domestic firms within the same industry, mainly through reduction of production costs, technology transfer and international R& D spillovers. Diffusion channels of technology know-hows and managerial practices induced by higher FDI penetration abroad make the purpose of the increased transparency and access of core technology practical. This article addresses this question through the lens of economics as to three collaborated sets of FDI determinants, 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. The author concludes that there should be a caveat to the non-guided outward FDI but strategically tailored to suit the requirements of multiplying the investment efficiency and climbing up the value ladder of global economy.

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