Abstract: FDI enterprises from the same source country agglomerated in a region in China, i.e., a geographical agglomeration, was a main trend in recent years. An oligopoly output competition model was therefore developed between FDI enterprises and host country enterprises, with a conjectural variable introduced to weigh up the cooperation level between relevant enterprises, thus analyzing the location choice behavior and motivation of the agglomeration of home-country FDI. It was found that the motivation mainly includes the reduction of cost and investment risk, China's governmental strategic policies and their powerful pulls, industrial traits of FDI and the cultural communication between host country and FDI source country. Aiming at the traits of regional agglomeration of home-country FDI, it is necessary to change the conventional idea about absorbing foreign investment and go on to the third-generation strategy for absorbing FDI.