Objectives, Locations Partner Selections of Foreign Invested Enterprises in China

Abstract

This paper attempts to identify the motivations, objectives, selection criteria for locations and partners of foreign invested enterprises (FIEs) in China and to compare the differences among investors from different source countries, by using a survey of 106 FIEs in China. It is found that the main motivations are China's huge potential market size, low labor cost and preferential government fiscal treatments. The main determinants of geographical destination are the location of the Chinese partner, better preferential policy and familiarity with the Chinese partner. The main determinants for partner selection are mutual trust between the two parties, good credit of the Chinese partner and capability to deal with local authorities. It is also found that there are no significant differences in the long-term objectives between the two distinguished groups of foreign investors (Hong Kong, Macao and Taiwan versus other multinationals from the rest of the world), though the differences exist in their short-run objectives and selection criteria for partners.