Factors affecting on China’s Electricity Industry for its outward foreign direct investment

Abstract

This empirical study examines the factors affecting on China’s electricity industry for its outward foreign direct investment. The purposes of this study are 1) to study the current situation of China's and worldwide in industry’s electricity under economic globalization phenomenon and, 2) to examine how China's and World's Gross Domestic Product, China's Research and Development, China's wage, China's foreign exchange reserves, Exchange rate, China's electricity exports and China's electricity production impact on outward foreign direct investment from China’s electricity industry. This study is based on Bayesian analysis using the Bayesian vector autoregression model and draws conclusions through Impulse response and Granger causality. The estimation results of the two priors of the Bayesian vector autoregression model are roughly the same, but in terms of the goodness of the model fitting, the Sims-Zha (normal-flat) prior model is better than the Litterman/Minnesota prior model. Based on impulse response and Granger causality test, the main factors affecting outward foreign direct investment in China's electricity industry are screened out. They are China's per capita of Gross Domestic Product, China's wage level, China's electricity exports, Exchange rate and China's electricity production. For outward foreign direct investment in China's electricity industry, China's per capita Gross Domestic Product, China's wage level, China's electricity exports, Exchange rate are positively proportional to it and China's electricity production is negatively proportional to it, all of which will have an impact on outward foreign direct investment in the short term.