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What Determines Inward FDI in China? --An empirical study using firm-level data

Author

Listed:
  • Bin Ni

    (PhD Candidate, Graduate School of Economics, Osaka University)

Abstract

Using firm-level data from an Enterprise Survey of World Bank, this paper is designed to test how policy variables can affect inward foreign direct investment ("FDI") in China. After excluding the problems of sample selection and endogeneity, the result shows that investment promotion agencies (IPAs) and investment incentive zones (IIZs) have significant positive effect on absorbing FDI in China. Other factors such as sales volume and R&D also have significant impact. I also found that both IPAs and IIZs play a more important role in inviting other foreign companies to come to China than they do to Hong Kong, Macau, and Taiwan ("HMT") enterprises. The last finding is that if the city has IPA only, its promotion effect actually outweighs the city with IPA or IIZ combined; on the other hand, if the city has IPA or IIZ, then its positive effect on absorbing FDI will be larger than the city with IIZ solely.

Suggested Citation

  • Bin Ni, 2013. "What Determines Inward FDI in China? --An empirical study using firm-level data," OSIPP Discussion Paper 13E004, Osaka School of International Public Policy, Osaka University.
    • Handle: RePEc:osp:wpaper:13e004
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    More about this item

    Keywords

    Investment promotion agency; firm-level data; sample selection; China;
    All these keywords.

    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

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