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An Empirical Study of Foreign Direct Investment Location in Eastern China

Author

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  • Xing Li
  • Keqiang Hou
  • M. W. Luke Chan

Abstract

This paper examines the determinants of foreign direct investment (FDI) for the Eastern Region of China as a whole by excluding the two lesser jurisdictions and concentrating on the Big Five jurisdictions from 1993 to 2005. Robust estimates and a better understanding of FDI in Eastern China are obtained by employing robust Ordinary Least Squares (OLS), the randomeffect model, and the fixed-effect model separately on each case. Without any outliers and serial correlation in residuals, the Big Five case gives us the most reliable estimates of determinants of FDI in Eastern China. Market size and labor quality are found to have a positive, significant, and quantitatively large effect on FDI in Eastern China, whereas education and infrastructure have a statistically nonsignificant positive direct effect on FDI. As for the level of local physical investment, we found a small crowding-out effect on FDI in the Big Five case.

Suggested Citation

  • Xing Li & Keqiang Hou & M. W. Luke Chan, 2008. "An Empirical Study of Foreign Direct Investment Location in Eastern China," Chinese Economy, Taylor & Francis Journals, vol. 41(6), pages 75-98, November.
    • Handle: RePEc:mes:chinec:v:41:y:2008:i:6:p:75-98
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    Cited by:

    1. Katiuscia Vaccarini, 2014. "Psychic distance and FDI: the case of China," Working Papers 1403, c.MET-05 - Centro Interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
    2. Abdisalan Salad Warsame, 2021. "The Location Choice of Foreign Direct Investment and Economic Development in Africa," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(10), pages 1-69, September.
    3. Dong, Yan & Fan, Cijun, 2017. "The effects of China's aid and trade on its ODI in African countries," Emerging Markets Review, Elsevier, vol. 33(C), pages 1-18.
    4. Omar Belkhodja, 2016. "FDI Location Decision: Evidence from Firms Investing in China," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(6), pages 1-47, May.

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