Determinants of Foreign Direct Investment in Renewable Energy and peculiarity of the industrial policy in China

Abstract

Foreign Direct Investment is considered not just as important source of capital but valuable channel for technology transfer. The amount of Foreign Direct Investment in renewable energy has been rapidly growing in recent years, but there are great differences in the amount allocated between countries. This paper first analyzes determinants of Foreign Direct Investment in wind energy in developing countries by employing Structural Equation Modeling, and clarifies the importance of renewable energy support policies for attracting investments. And the paper further investigates into the renewable energy policies in China, which has a unique composition of Foreign Direct Investment and domestic investment in its wind energy sector. By doing so, the paper sheds light on the effect of renewable energy policies on Foreign Direct Investment, and how China became one of the leading countries in wind energy sector with their peculiar renewable energy industrial policy.