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This paper compares and contrasts the determinants of outward foreign direct investment from the People's Republic of China (PRC) with those of outward foreign direct investment from Japan, Republic of Korea, and Taipei,China. The paper examines descriptively and econometrically the motives and factors behind the investment abroad from these four Asian economies. The hypotheses being tested include the market-seeking hypothesis, the natural resource-seeking hypothesis, the technology acquisition hypothesis, and the human capital hypothesis. The paper examines outward foreign direct investment by the PRC for the years 1991-2006, Japan for 1983-2007, the Republic of Korea for 1980-2007, and Taipei,China for 1968-2007. Results using the full set of determinants yield uniform support for the market-seeking hypothesis. The natural resource-seeking motive holds for Japan and the Republic of Korea, while the technology acquisition hypothesis seems relevant for Taipei,China. The PRC's investments tend to go to destinations with poorer labor quality. In addition, openness is important for Japanese investment abroad, while distance deters investment from the PRC and Republic of Korea.
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I. INTRODUCTION
In recent years, the spectacular growth of the People's Republic of China (PRC) has attracted increasing attention from scholars and policymakers. Measured by market exchange rates and using the official government figures, the PRCs gross domestic product (GDP) reached $4.4 trillion in 2008. The PRC has surpassed Germany as the third largest economy in the world. Facing the ongoing global financial and credit crisis, it is expected that the pace of this economic growth will slow down. However, to combat slower economic growth, the government of the PRC has been implementing a stimulus package worth more than $580 billion. Forecasts of the current growth rate of the PRC vary, but most expect that the PRC will still meet its target 8 percent growth in 2009.1
As the PRC has grown, its inward direct investment has also increased substantially. According to UNCTAD (2008), foreign direct investment (FDI) inflows reached $83.5 billion in 2007. A large literature has emerged on studying various aspects of FDI flowing into the PRC (see, e.g., Fung et al. 2005). But a more interesting trend has caught the attention of scholars and policymakers in the last few years: the surge of FDI outflows from emerging economies like...