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The location of foreign insurance companies in China

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  • Wu, Xiaohong
  • Strange, Roger
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    Abstract

    The potential of the Chinese insurance market is enormous, as current per capita insurance spending is a fraction of that in other developing economies. The Chinese authorities are aware that the development of an indigenous insurance capability is essential to China's continued economic restructuring, and that foreign insurers have an important role to play in this process. They have thus started to liberalise, albeit cautiously, the policy environment for foreign insurers. One of the crucial strategic questions for such insurers is where to establish their representative offices within China, given the size of the country. This paper uses a Conditional Logit Model to assess the determinants of location choice using a sample of 138 foreign representative offices established over the period 1992-96. Proximity to the headquarters of the Regulatory Authority, openness for the award of operating licenses, current and future market demand, and the presence of other foreign investment are all found to have significant effects upon the choice of location. Cost and infrastructure considerations were generally found to be of little significance.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 9 (2000)
    Issue (Month): 3 (June)
    Pages: 383-398

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    Handle: RePEc:eee:iburev:v:9:y:2000:i:3:p:383-398

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    Related research

    Keywords: Location choice Insurance Foreign direct investment China;

    References

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    1. Broadman, Harry G. & Xiaolun Sun, 1997. "The distribution of foreign direct investment in China," Policy Research Working Paper Series 1720, The World Bank.
    2. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    3. Keith Head & John Ries & Deborah Swenson, 1994. "Agglomeration Benefits and Location Choice: Evidence from Japanese Manufacturing Investment in the United States," NBER Working Papers 4767, National Bureau of Economic Research, Inc.
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    8. Head, Keith & Ries, John, 1996. "Inter-City Competition for Foreign Investment: Static and Dynamic Effects of China's Incentive Areas," Journal of Urban Economics, Elsevier, vol. 40(1), pages 38-60, July.
    9. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-83, November.
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    Cited by:
    1. Shaoming Cheng & Roger Stough, 2006. "Location decisions of Japanese new manufacturing plants in China: a discrete-choice analysis," The Annals of Regional Science, Springer, vol. 40(2), pages 369-387, June.
    2. Chen, Fu-Chiang & Liu, Z.-John & Kweh, Qian Long, 2014. "Intellectual capital and productivity of Malaysian general insurers," Economic Modelling, Elsevier, vol. 36(C), pages 413-420.
    3. Fetscherin, Marc & Voss, Hinrich & Gugler, Philippe, 2010. "30 Years of foreign direct investment to China: An interdisciplinary literature review," International Business Review, Elsevier, vol. 19(3), pages 235-246, June.
    4. Hogenbirk,Annelies & Narula,Rajneesh, 2004. "Location and agglomeration of FDI in The Netherlands: implications for policy," Research Memorandum 006, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    5. Bagchi, Prabir & Lejeune, Miguel A. & Alam, A., 2014. "How supply competency affects FDI decisions: Some insights," International Journal of Production Economics, Elsevier, vol. 147(PB), pages 239-251.
    6. Jessie Poon & Alan MacPherson, 2003. "Technology Acquisition among Asian Firms and Technology Clusters in the United States," ERSA conference papers ersa03p203, European Regional Science Association.
    7. Berrill, Jenny & Mannella, Giancarlo, 2013. "Are firms from developed markets more international than firms from emerging markets?," Research in International Business and Finance, Elsevier, vol. 27(1), pages 147-161.
    8. Kearney, Colm, 2012. "Emerging markets research: Trends, issues and future directions," Emerging Markets Review, Elsevier, vol. 13(2), pages 159-183.
    9. Oetzel, Jennifer M. & Banerjee, Sudeshna Ghosh, 2008. "A case of the tortoise versus the hare? Deregulation process, timing, and firm performance in emerging markets," International Business Review, Elsevier, vol. 17(1), pages 54-77, February.
    10. Canfei He & Junsong Wang & Shaoming Cheng, 2011. "What attracts foreign direct investment in China’s real estate development?," The Annals of Regional Science, Springer, vol. 46(2), pages 267-293, April.
    11. Aggarwal, Raj & Berrill, Jenny & Hutson, Elaine & Kearney, Colm, 2011. "What is a multinational corporation? Classifying the degree of firm-level multinationality," International Business Review, Elsevier, vol. 20(5), pages 557-577, October.
    12. Zhu, Hong & Eden, Lorraine & Miller, Stewart R. & Thomas, Douglas E. & Fields, Paige, 2012. "Host-country location decisions of early movers and latecomers: The role of local density and experiential learning," International Business Review, Elsevier, vol. 21(2), pages 145-155.

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