This paper focuses on an ethnic dimension of Chinese FDI and non-Chinese FDI in China. It seeks to highlight social-network behavioural approach as a method for understanding the differences between the two types of investors. It examines the effect of guanxi on the locational and sectoral choices of FDI. Guanxi is the natural advantage and competitive advantage of Chinese FDI. Based on probability sampling, questionnaire surveys conducted in China are used to verify the expected significance of guanxi networks for overseas Chinese investors. Survey analysis results indicate that guanxi networks have played a significant role in the locational and sectoral choices of Chinese FDI compared with non-Chinese FDI. This study also explains how small- and medium-sized overseas Chinese investment can gain competitive advantage.