Drawing on Chinese listed-firm data (2005–2022), this article examines the impact of productivity and state ownership on outward foreign direct investment (OFDI). Productivity robustly facilitates OFDI, whereas state ownership impedes it. The productivity effect is strongest in high-sunk-cost industries, eastern and central regions, and subsidiary-level investment; the ownership barrier persists across high- and low-sunk-cost sectors, the eastern region, and subsidiary ventures. Productivity partly offsets the ownership disadvantage, and firms’ international experience amplifies the productivity effect. Notably, central state-owned enterprises reverse the negative ownership effect. Overall, China’s OFDI is driven predominantly by productivity-induced market-seeking, offering new micro-level evidence on its determinants.
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