Introduction
With the irreversible trend of globalization, trans-national corporations (TNCs) have gain significant power in both the business and political world since the Second World War. Gillies (2005) indicate that the multinational direct investment has grown from 4.4% with respect to the world output in 1960 to 23% in 2003. As an important branch of international business activities, foreign direct investment (FDI) has also experienced a steady increase with an acceleration since 2004 (UNCTAD,2007)
Within the last few decades, China has become a successful story in the area of economics, where FDI contributes tremendously. (Fung, Iliza and Tong,2002) Accompanying with the openness of China, FDI inflows has jumped from 0 in 1979 to more than 35 billion US dollars in 1998 (Sun, Tong et al) Moreover, the figure of FDI has increased to 69 billion US dollars in 2006, ranking as the top one in East Asia(UNCTAD,2007). Trietak (2006) searched more recent statistics and found more rapid increase in the last decade.
Source: Trietak (2006) Is China’s lustre dimming? From a first glance at recent FDI statistics it might appear so, but upon closer inspection … The inside Bureau Issue No.5-October 2006
Various theories around the determinants of FDI inflow were established. Dunnings (1993,2000) established an eclectic framework around the determinant of FDI . He attributed various factors into 3 broad categories, namely ‘ownership advantages, location advantages and internalisation advantages’, and believe FDI only occur when the determine factors are simultaneously satisfied. Navaretti and Venables (2005) examined more specific areas that are concerned more with location factors, including trade cost, size of market and tax. They ...