This dissertation explores the causes and consequences of booming Chinese outward foreign direct investment (OFDI). Chinese OFDI challenges established theoretical frameworks that have been used over the past decades to explain international financial flows. The research proposes and tests a new hypothesis, namely that the way China opened its economy to FDI brought about economic structural transformation and generated domestic capacity that can explain the patterns of OFDI we are now seeing. In essence, there can be a relationship between the inward FDI that a country receives and the outward FDI that a country then generates. The dissertation argues this relationship can be fostered through investment policies and regulatory frameworks governing inward and outward investment flows. It concludes with a series of considerations for China and other emerging markets seeking to use investment policy as part of their national economic development strategies.