What Explains the Boom of Foreign Direct Investment in China?
AbstractThis study first provides several extraordinary characteristics of the boom of foreign direct investment (FDI) fiows into China. These include the massive predominance of investment from Asian developing economies, especially Hong Kong, and the different sectoral and geographical distributions of FDI from developing Asia and developed Western countries. Based on these facts and the relevant theoretical considerations, a relative-demand model is specified and estimated with time series data. The model (a) formulates China’s location advantages relative to other developing countries, and (b) distinguishes between Asian and Western FDI. The estimates indicate that China’s large market size, liberalized FDI policies, and political stability are attractive to both types of FDI. While Asian investors seem to be motivated largely by China’s cheap labor, Western FDI is more likely to appear for local market penetration when China’s infrastructure and human capital conditions are improved and when trade barriers are large.
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Bibliographic InfoArticle provided by Camera di Commercio di Genova in its journal Economia Internazionale / International Economics.
Volume (Year): 54 (2001)
Issue (Month): 2 ()
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Vertical and Horizontal Foreign Direct Investment; Location Advantages;
Find related papers by 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, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
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- Steven Globerman & Daniel Shapiro, 2004.
"Governance Infrastructure and U.S. Foreign Direct Investment,"
- Steven Globerman & Daniel Shapiro, 2003. "Governance infrastructure and US foreign direct investment," Journal of International Business Studies, Palgrave Macmillan, vol. 34(1), pages 19-39, January.
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