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The FDI-Income Growth Nexus: a review of the Chinese experience

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Amongst many economists, China serves as the foremost example of the benefits that developing countries can derive from being open to foreign direct investment (FDI). Since the early 1990s, China has, by a large margin, received more FDI than any other developing country. It has also experienced the world�s fastest rates of income growth. Moreover, those provinces within China that have hosted the bulk of FDI have grown at relatively faster rates. However, a literature has now emerged that makes it possible to better assess the relationship between FDI and income growth beyond these stylised facts. A review of this literature leads to the conclusion that China�s FDI-income growth nexus is in need of considerable qualification. The paper then attempts to reconcile the perception that FDI has been an important driver of income growth on the one hand with the limited evidence to that effect on the other. By way of conclusion, policy implications consequent to the review of literature are drawn.

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Paper provided by School of Economics, University of Queensland, Australia in its series EAERG Discussion Paper Series with number 0905.

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Handle: RePEc:qld:uqeaer:09

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  1. Shahid Yusuf, 1994. "China's Macroeconomic Performance and Management during Transition," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 71-92, Spring.
  2. Berthelemy, Jean-Claude & Demurger, Sylvie, 2000. "Foreign Direct Investment and Economic Growth: Theory and Application to China," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 140-55, June.
  3. Mario Biggeri, 2003. "Key Factors of Recent Chinese Provincial Economic Growth," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 1(2), pages 159-183.
  4. Edward M. Graham & Erika Wada, 2001. "Foreign Direct Investment in China: Effects on Growth and Economic Performance," Working Paper Series WP01-3, Peterson Institute for International Economics.
  5. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 171-197.
  6. Xiaobo Zhang & Kevin Zhang, 2003. "How Does Globalisation Affect Regional Inequality within A Developing Country? Evidence from China," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 47-67.
  7. WHALLEY, John & XIN, Xian, 2010. "China's FDI and non-FDI economies and the sustainability of future high Chinese growth," China Economic Review, Elsevier, vol. 21(1), pages 123-135, March.
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Cited by:
  1. Ying Xu, 2012. "How does financial system efficiency affect the growth impact of FDI in China?: Evidence from provincial data 1999-2006," China Finance Review International, Emerald Group Publishing, vol. 2(2), pages 406-428, August.
  2. Ying Xu, 2009. "How does financial system efficiency affect the growth impact of FDI in China?," Asia Pacific Economic Papers 383, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  3. A. Yasemin Yalta, 2011. "New Evidence on FDI-Led Growth: The Case of China," Working Papers 1107, TOBB University of Economics and Technology, Department of Economics.

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