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Foreign Manufacturing Investment in China: The Role of Industrial Agglomeration and Industrial Linkages

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  • Canfei He

Abstract

This paper investigates the forces that determine the industrial distribution of foreign manufacturing investment. It highlights the importance of industrial agglomeration and industrial linkage in attracting foreign investment to manufacturing industries. Using panel data for two‐digit manufacturing industries in Beijing during the period of 1999‐2004, this study finds that geographically agglomerated industries with strong intra‐industrial linkages are indeed attractive to foreign investment. Previous foreign investment has led to the current industrial concentration of foreign investment. Investors also favor capital‐intensive and technology‐intensive industries, and they tend to be attracted to the most profitable and exporting industries, but avoid industries with high real labor costs and high entry barriers. Competitive local industries that possess comparative advantages are critical for attracting foreign investment. The existence of industrial clusters certainly enhances a city's attractiveness to foreign investment.

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  • Canfei He, 2008. "Foreign Manufacturing Investment in China: The Role of Industrial Agglomeration and Industrial Linkages," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(1), pages 82-99, January.
    • Handle: RePEc:bla:chinae:v:16:y:2008:i:1:p:82-99
    DOI: 10.1111/j.1749-124X.2008.00101.x
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    2. Canfei He & Fenghua Pan, 2010. "Economic Transition, Dynamic Externalities and City-industry Growth in China," Urban Studies, Urban Studies Journal Limited, vol. 47(1), pages 121-144, January.
    3. Shujie Yao & Jing Fang & Hongbo He, 2020. "Can Time–Space Compression Promote Urban Economic Growth? Evidence from China's High‐speed Rail Projects," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(5), pages 90-117, September.

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