Comparative analysis of FDI determinants in China and Russia

Abstract

This paper attempts to offer an explanation to the fact that China has been more successful in attracting foreign direct investment than Russia. The focus of the paper is on the recent years rather than on the outset of the economic transformation in both countries. For this purpose the paper first presents a set of factors that affect the attractiveness of a location to FDI and then analyzes and compares these factors in China and Russia. The FDI determinants that are chosen for the analysis have been grouped into two categories, those that are “natural” and those that can be controlled by the authorities. The subsequent analysis of both groups of factors reveals that they as a whole appear to favour FDI inflows much more in China than in Russia, even though variations exist between them. This offers a possible explanation as to why China attracts more FDI than Russia.