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How does foreign direct investment affect economic growth in China?

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  • Kevin Honglin Zhang

Abstract

How does inward foreign direct investment (FDI) affect a transitional economy? This study attempts to analyze the role of FDI in China’s income growth and market‐oriented transition. We first identify possible channels through which FDI may have positive or negative effects on the Chinese economy. Using a growth model and cross‐section and panel data for the period 1984‐98, we provide an empirical assessment, which suggests that FDI seems to help China’s transition and promote income growth, and that this positive growth effect seems to rise over time and to be stronger in the coastal than the inland regions. JEL classification: F21, F23, O53.

Suggested Citation

  • Kevin Honglin Zhang, 2001. "How does foreign direct investment affect economic growth in China?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(3), pages 679-693, November.
  • Handle: RePEc:bla:etrans:v:9:y:2001:i:3:p:679-693
    DOI: 10.1111/1468-0351.00095
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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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