Abstract By introducing financial development and quality of contractual environment into Antr鄐 (2003) model, the paper explains why MNCs enter China through vertical FDI rather than out-sourcing. It shows that given fragmentized production and host country's cost advantage, under-developed financial sector will cause the supplier in host country to bear higher financing costs, and worse contractual environment will also raise the probability of the supplier to hand over low-quality intermediary products to MNCs.
YANG Zhen-Ceng. The Mechanism of MNCs’ Vertical FDI Decisions in China: the Impact of Financial Development and Contractual Environment. Economic Survey, 2013, 1(1): 038.
2013, Vol. 1 
