Motivation of Chinese investments in Vietnam

Abstract

China attracted a record of US$52.7 x 100,000,000 in foreign direct investment (FDI) in the year 2002, surpassing the United States to become the world's largest FDI recipient. China's success in attracting FDI has received significant attention from academics. Several theoretical approaches have been developed to explain the determinants of FDI in China. However, it seems to be ignored that China has also become a growing provider of significant FDI to the rest of the world. According to United Nations Conference on Trade and Development (UNCTAD)'s 2004 report, as a developing country,replacing Japan, China has made the list of the expected top five home countries worldwide for the first time in terms of geographical coverage (2004-2005). Vietnam is second largest market and another emerging transition tiger in Southeast Asia. Both China and Vietnam were and are experiencing transitions from centrally planned economy to free market economy. This paper, therefore, attempts to explore the development of Chinese investment in Vietnam, analysing the main motives for, and characteristics of, Chinese Multinational Enterprises (MNE)'s investment in Vietnam.