A wide body of research has been published on foreign direct investment (FDI) in transition economies. The special case of China has received particular attention since the country's leadership officially sparked the economic reform process in 1978. Stakeholders outside China have distinct views of conditions within the country. China is not a homogeneous market, but is in fact highly diversified. This study investigates the factors on which FDI-decisions in hotel real estate in China are based at the firm level. It provides an insight into dynamic decision-making processes in this specific area during times of rapid socio-economic transformation in the world's largest transition economy. This research shows that hotel investment is taking place at the intersection of tourism policy, urban planning, and real estate economics. It sheds light on institutional conditions under which such transactions take place. This work is built on critical theory adopting a (primarily Straussian ) grounded theory approach. This modus operandi broaches relevant stakeholders' tacit knowledge, revealing the complexity of the socio-economic reality they experience. Analysis of this dissertation points to the abstraction of three distinct categories, which capture specific concepts describing principal influences on foreign-invested hotel properties in China. These are (1) hotels' hedonist appeal (HHA). (2) investors' sphere of influence (SOI), and (3) poly-politics (POP). Where HHA refers to the auxiliary nature of hotel assets in the wider area of real estate economics and whilst hotel developments are driven by hedonist motives, their immediate economic efficiency becomes secondary. SOI refers to the foreign investors' ability to control their business environment. It becomes a function of a wider market entry strategy into China, and acknowledges the importance of actively developing and managing relationships with various parties involved in the development process. POP refers to the differences in political governance across China, its literally amorphous nature and the multi-directedness of political decision-making, dependent on: (i) geography, (ii) administrative level, and (iii) time. These effects can begin at the onset of an investment project development process through to its actual operation, and investors want to be wary of them.
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