eThesis - School of Business electronic theses

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This study examines the motives and locational factors of the Chinese foreign direct investment in smaller developed economies. The target economies of the study are both Finland and Sweden in order to improve the generalizability of the results. In the academic literature, foreign direct investments have been studied extensively but the Chinese investment is a relatively new phenomenon which has not been studied much - especially in the small developed economies. In recent years, the Chinese have rapidly increased their foreign investments, so it is increasingly important to understand why the Chinese invest abroad and how the different factors affect their investment decisions about the destination countries. Purpose of this study is to provide additional information on these issues in the context of small developed economies.

The research method of the study is a qualitative multiple-case study which is supported by secondary sources. The secondary sources have been documents, archival materials and statistics, among others. For the study totally 38 Finnish, Chinese and Swedish persons were interviewed representing Chinese enterprises, chambers of commerce, investment promotion organizations, partner as well as other expert organizations. The interviews were conducted as semi-structured and open-ended theme interviews.

According to the results, the Chinese invest in the studied small developed economies particularly because of market seeking and strategic asset seeking motives. Market seeking investments have been made mostly by the small family enterprises and high technology companies especially in ICT sector, while strategic asset seeking investments have been made by the advanced Chinese ICT and software corporations. Small developed economies do not possess location-specific advantages which are particularly attractive for the Chinese investments on a global scale. The cost level and taxation are high, natural resources scarce, markets small and the countries are distant from China both geographically and culturally. However, the clusters of the knowledge-intensive sectors attract the large and international Chinese companies. In addition, the Chinese investors are interested in the developed infrastructure as well as high level of education and research. Both the investment motives and location factors are mostly similar in the target economies of the study. The strengths of Sweden have been the active invest-in promotion, broader industrial base as well as long trade relations with China.

Keywords: China, foreign direct investments, small developed countries, investment motives, locational factors