The Chinese ODI has increased dramatically since 2001 . This reason can be attributed to the entering of China in WTO which gave her increased access to international trade. However, the sudden entrance of China in WTO cannot be coincidence. There has to be some internal motivation for outward investment. However, before going into that, it would be prudent to analyze the internal state of China and the participants in ODI.
China has a uniquely different path of ODI as compared to other countries for it is mostly witnessed from developed countries that are largely market oriented. China on the other hand is a largely socialistic economy with a very significant ownership of the central government. In most countries, outward expansion has occurred in a backdrop of social change and ownership transition. A similar change has been seen in China as well, mostly in the favour of private ownership through a declining share of the state sector in the total economy through a series of privatization programs being implemented (Garnaut, et al., 2006). The transition occurred in the 1990s when the private sectors started playing a key role in the more competitive sectors whereas SOEs concentrated in the sectors of heavy industries (steel), resources (petroleum) and utilities and infrastructure (electricity) (Song, et al., 2011).
China has adopted a gradualist reform process (Peng, 2000) from socialism to capitalism and has grown increasingly tolerable to inward FDI. Unlike the Russian Federation which adopted a shock therapy and is still struggling with moderate levels of growth, PRC has experienced a spiked growth in the national income, inward FDI and exports growth. These factors can influence the ODI from China, contrary to the conventional Investment Development Path which started with a direct and bivariate relationship between development of the economy and ODI (Dunning, 1981). The indicator of development used here is the per capita GDP of the economy. However, later modifications suggested a different approach.