Chinese FDI in the Netherlands: The transaction costs perspective

Historically, China was always seen as a large exporter and a destination for outsourcing and FDI. While nowadays China is the second largest economy in the world, it certainly has the power to heavily invest in other countries instead of merely being invested. China has profound trade relations with the Netherlands ever since the 17th century. Dutch China trade is mainly composed of trade in tasks instead of traditional trade in goods, where the Dutch seem to have outsourced production and assembly tasks to China while China has outsourced distribution and trade management activities to the Netherlands. This complementary nature sheds light on the motives for FDI as well: what are the Dutch relative endowments that made up this make (i.e., set up an international branch) decision rather than simply buy (i.e., outsourcing) from the Netherlands? This paper focuses on finding the determinants of Chinese FDI in the Netherlands given the opportunities for Chinese companies to reduce transaction cost with this location decision. Using the determinants found, why make not buy decision will be explained.