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trading relations from China call for trade support investments and openness of the countries provides opportunities to use them as export-platforms to the larger markets.
The Chinese have also established large wholesale centers in several countries but in most cases they have not bloomed, maybe because the ultimate motives of the founders have obviously been real estate speculations and rental fees from the Chinese small-scale manufacturing due to high production costs. This result is in line with Buckley et al.
(2008b) that the Chinese utilize manufacturing FDI mostly in other low-cost countries near to the large and rich markets.
The high level of development in these economies usually means that a country possesses assets, i.e. advanced factor conditions (Porter 1990, 74-77), such as technology, educated labour and brands, as well as developed legislation and research institutions. All these facilitate the Chinese strategic asset seeking FDI and acquisitions of assets in those countries, such as in Finland and Sweden which were examined in this study. Access to the local capital markets has not been an important reason for the Chinese to invest into the typical small developed economies (excluding Hong Kong and Singapore) since their capital markets are rather limited and the Chinese investors have received their finance mostly from the Chinese banks if needed. This is inconsistent with the result of Deng (2004) and indicates the strengthening of the Chinese domestic financial institutions during the recent years.
Resource seeking FDI are rarer because of the sparsity of natural resources in the countries or the difficulties of acquiring them due to established ownership. Usually there are also other, more important, motives behind the rare Chinese resource seeking FDI in the small developed economies, such as strategic asset seeking. Chinese efficiency seeking FDI are also rare but potential in some small developed economies, especially in the logistics sector if the countries locate in a pivotal area for transportation. These kinds of small developed countries are e.g. the Netherlands and Sweden in the context of North Europe.
As mentioned earlier in this study, the small developed economies basically do not have the basic location advantages that attract the Chinese most and thus the amount of the
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Chinese FDI in those economies has not been remarkable (e.g. Kolstad & Wiik 2009).
However, their advanced factor conditions and demand factors, i.e. high purchasing power, open and transparent economies – also towards the competitions from abroad - , good governance and advanced legislation, high technological and R&D level, advanced consumer markets, educated labour and possible membership in special economic regions, such as EU, are seen positive for the Chinese FDI. These results are in line with, for instance, UNCTAD report 2006 (156-157) of Chinese FDI in general level. Therefore these countries have found to be suitable try-out fields to test and develop products, service and management before entering the bigger markets, particularly in Europe where larger markets are close to the Nordic countries and small developed countries in Western and Central Europe, for instance. Furthermore, the clusters of different industries are a very powerful attracting factor for the Chinese MNEs, among others. The findings of this study indicate that the strong ICT clusters in Finland and Sweden have been the most important single reason for several significant Chinese FDI in the countries. In other words, related and supporting industries has found to be the most significant attribute from Porter‟s national diamond model (Porter 1990).
The Chinese investors, especially the smaller companies and entrepreneurs, are also interested in the high welfare, social security, free or cheap education as well as safe and clean environment. To this type of investors an opportunity to obtain residence permits in the countries with high living standards, and possibly also in EU, is very attractive. Deng (2004) and Antkiewicz & Whalley (2007) had earlier come to the same conclusions.
Apparently, the number of Chinese residents has a substantial influence on the amount of the Chinese inward FDI also in the small developed economies, similarly as at general level (Child & Rodrigues 2005). The results of this study from Finland and Sweden suggest in this direction as there are much more the Chinese residents as well as FDI in Sweden than in Finland. In the other hands, there is not unambiguous evidence that the number of the Chinese students is correlated to the amount of the inward Chinese FDI in the country. Obviously, it is more important how well the Chinese are employed after their graduation so that they would remain to create networks between the country of residence and China.
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In China, many small developed economies are not too well-known so presence and focused country promotion are essential factors which directly affect the interest of the Chinese to invest, i.e. the host country governments‟ role is crucial in this sense as Porter (1990) and Dunning & Lundan (2008) also emphasized. The number of companies and their institutions (e.g. chambers of commerce) established in China is an important factor as well as how much certain country does invest-in promotion in China. The results of this study indicate that these factors influence greatly the development of relations and hence the awareness of the Chinese about the investment opportunities in a small and lesser-known country. However, merely the trade between the countries itself does not appear to increase the amount of the Chinese FDI in the trading partner countries, unlike in some studies indicate (e.g. Buckley et al. 2007). Only in the case of the Netherlands the trade may be the explanatory factor for the relatively high number of the Chinese FDI in the country, likely because of logistical reasons.
Finally, the political relations between countries are not very important for the Chinese FDI in the small developed economies, as long as they are at a tolerable level. The reason for this largely is that the Chinese has made only a few investments in natural resources in these economies. The investments of this kind are almost without exception made by the Chinese SOEs and because of that, the political relations are important behind the investments. In addition, The Chinese government also plays an important role as a financier and guarantor in the major M&A made by the Chinese MNEs. Also the small developed economies have experience of this, such as in Sweden in the acquisition of Volvo by a Chinese company, and the cases of this kind are likely to increase in the future for the growth and internationalization of the Chinese companies. All in all, the role of the Chinese government is lighter behind the Chinese FDI in small developed economies than it often is in many other destinations (e.g. Buckley et al. 2007 and von Zedtwitz 2005). However, by the increasing number of M&A its importance is growing at least as a financial guarantor for the Chinese MNEs also in the small developed economies.
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