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Foreign Direct Investment in China: Determinants and Effects

  • Stèphane Dees

This paper attempts to assess the determinants of Foreign Direct Investment (FDI) in China and its effects on the whole economy. After presenting the main theoretical contributions and the previous works done about China’s inward-FDI, an empirical study has been implemented extending the previous ones with a different data set (more recent) and with different methodologies. The traditional determinants of FDI seem to be relevant for China: domestic market size, cost advantages and openness to the rest of the world. Concerning the consequences of FDI on the Chinese economy, our empirical evidence supports the view that FDI affects China’s growth through the diffusion of ideas. Through the introduction of new ideas, multinational firms develop technical progress and hence long-run economic growth. The transmission of ideas seems to have had a positive effect on the Chinese growth. Copyright Kluwer Academic Publishers 1998

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File URL: http://hdl.handle.net/10.1023/A:1003576930461
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Article provided by Springer in its journal Economics of Planning.

Volume (Year): 31 (1998)
Issue (Month): 2 (May)
Pages: 175-194

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Handle: RePEc:kap:ecopln:v:31:y:1998:i:2:p:175-194
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  1. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  2. Barrell, Ray & Pain, Nigel, 1997. "Foreign Direct Investment, Technological Change, and Economic Growth within Europe," Economic Journal, Royal Economic Society, vol. 107(445), pages 1770-86, November.
  3. repec:nsr:niesrd:91 is not listed on IDEAS
  4. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
  5. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-77, July.
  6. Chen Chunlai, 1996. "Recent Developments in Foreign Direct Investment in China," Chinese Economies Research Centre (CERC) Working Papers 1996-03, University of Adelaide, Chinese Economies Research Centre.
  7. Froot, Kenneth A & Stein, Jeremy C, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1191-217, November.
  8. Kamath, Shyam J, 1990. "Foreign Direct Investment in a Centrally Planned Developing Economy: The Chinese Case," Economic Development and Cultural Change, University of Chicago Press, vol. 39(1), pages 106-30, October.
  9. Xiaming Liu & Haiyan Song & Yingqi Wei & Peter Romilly, 1997. "Country characteristics and foreign direct investment in China: A panel data analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(2), pages 313-329, 06.
  10. Wolfgang HÄRDLE & J. MARRON & L. YANG, 1996. "Discussion," SFB 373 Discussion Papers 1996,65, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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