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What Attracts Foreign Multinational Corporations To China?

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  • Kevin Honglin Zhang

Abstract

After adopting the open‐door policy, China experienced a boom of inward foreign direct investment (FDI) by multinational corporations. This article attempts to assess effects of location characteristics and government policies on FDI flows during the period 1987–98. A model of FDI determinants is specified and estimated with cross‐section and panel data. The estimates indicate that China's huge market size, liberalized FDI regime, and improving infrastructure are attractive to multinationals. The regional distribution of FDI within China is influenced largely by FDI incentives and historical‐cultural links with foreign investors, along with other location factors.

Suggested Citation

  • Kevin Honglin Zhang, 2001. "What Attracts Foreign Multinational Corporations To China?," Contemporary Economic Policy, Western Economic Association International, vol. 19(3), pages 336-346, July.
    • Handle: RePEc:bla:coecpo:v:19:y:2001:i:3:p:336-346
    DOI: 10.1093/cep/19.3.336
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