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Productivity And Economic Growth: An Empirical Assessment Of The Contribution Of Fdi To The Chinese Economy

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  • Zhaoyong Zhang

    (Department of Economics, National University of Singapore)

Abstract

We estimate the contribution of FDI to the efficiency and productivity growth in a cross-region regression framework, utilising China¡¯s provincial data from 1984 to 1997. We find a bidirectional causal linkage between FDI and productivity growth across the regions in China, suggesting that changes in FDI intensity Granger-cause changes in productivity, and vice versa. China¡¯s economic growth is found largely due to the rapid expansion of investment in fixed assets. Human capital development becomes increasingly important to the labour productivity growth, and FDI has certain effects on labour productivity but not so strong and significant. Thus, the contribution of FDI to China¡¯s technological progress through technology transfer is still not noticeable, and many regions in China still experience inefficiency. This raised the concern over the issue of how to improve economic efficiency and technology transfer in order to sustain China¡¯s rapid growth in the long run. It also concerns what kinds of development strategy and industrial policy toward FDI that China is to form.

Suggested Citation

  • Zhaoyong Zhang, 2002. "Productivity And Economic Growth: An Empirical Assessment Of The Contribution Of Fdi To The Chinese Economy," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 27(2), pages 81-94, December.
    • Handle: RePEc:jed:journl:v:27:y:2002:i:2:p:81-94
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    Cited by:

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    2. Milena Pesheva & Aleksandar Vasilev, 2017. "Endogenising Total Factor Productivity: The Foreign Direct Investment Channel in the Case of Bulgaria (2004-2013)," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 15(2), pages 127-145.
    3. Aurora Teixeira & Li Shu, 2012. "The level of human capital in innovative firms located in China. Is foreign capital relevant?," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 17(2), pages 343-360.
    4. Dong Guo & Sandy Dall’erba & Julie Le Gallo, 2013. "The Leading Role of Manufacturing in China’s Regional Economic Growth," International Regional Science Review, , vol. 36(2), pages 139-166, April.
    5. Chengjun Wang & Zhaoyong Zhang & Ximin Fei, 2018. "Efficiency and Risk in Sustaining China’s Food Production and Security: Evidence from Micro-Level Panel Data Analysis of Japonica Rice Production," Sustainability, MDPI, vol. 10(4), pages 1-14, April.
    6. Akinlo Taiwo & Simon-Oke O. Olayemi, 2015. "Re-examine foreign direct investment and economic growth: Panel co-integration and causality tests for sub-Saharan African countries," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 18(1), pages 73-86, March.
    7. Hornstein, Abigail S. & Naknoi, Kanda, 2023. "FDI commitments increase when uncertainty is resolved: Evidence from Asia," Journal of Asian Economics, Elsevier, vol. 87(C).
    8. Xu, WeiGuo & Hu, DaiPing & Lei, AiZhong & Shen, HuiZhang, 2008. "FDI chaos and control in China," Research in International Business and Finance, Elsevier, vol. 22(1), pages 17-28, January.
    9. Zhaoyong Zhang & LI Chuan, 2006. "Country-specific factors and the pattern of intra-industry trade in China's manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(8), pages 1137-1149.
    10. Ogbeifun Lawrence & Shobande Olatunji Abdul, 2020. "Causality Analysis of Disaggregated FDI Inflows on Sectorial Growth in OECD Area," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 30(4), pages 92-110, December.
    11. Asaduzzaman, Md, 2019. "FDI as an Opportunity for Economic growth of Bangladesh: A VECM Analysis," MPRA Paper 110328, University Library of Munich, Germany, revised 05 Dec 2019.
    12. Duan, Yuwan & Dietzenbacher, Erik & Los, Bart & Yang, Cuihong, 2021. "How much did China's emergence as “the world's factory” contribute to its national income?," China Economic Review, Elsevier, vol. 69(C).

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    More about this item

    Keywords

    China; Growth; Productivity; FDI; Human Capital;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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