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FDI and Economic Development: Evidence from China’s Regional Growth

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  • Xiangbo Liu
  • Yu Luo
  • Zhigang Qiu
  • Ru Zhang

Abstract

Using China’s provincial data for 1978–2011, we examine the channels through which foreign direct investment (FDI) affects China’s regional growth and inequality. We find that FDI facilitates growth by enhancing physical and human capital accumulation. FDI also has a negative effect on output growth by crowding out domestic investment, reducing local government revenue, and increasing the opportunity cost of technology innovations. The imbalance of FDI inflows among regions widens the interregional growth gap through its effect on physical capital accumulation and technology progress while it narrows the growth gap by affecting the level of higher education, industrial structure, government revenue, degree of openness, and trade surplus.

Suggested Citation

  • Xiangbo Liu & Yu Luo & Zhigang Qiu & Ru Zhang, 2014. "FDI and Economic Development: Evidence from China’s Regional Growth," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S6), pages 87-106, November.
    • Handle: RePEc:mes:emfitr:v:50:y:2014:i:s6:p:87-106
    DOI: 10.1080/1540496X.2014.1013852
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    Cited by:

    1. Lifeng Chen & Fuxuan Guo & Lingyan Huang, 2023. "Impact of Foreign Direct Investment on Green Innovation: Evidence from China’s Provincial Panel Data," Sustainability, MDPI, vol. 15(4), pages 1-17, February.
    2. Miaojie Yu, 2020. "China-US Trade War and Trade Talk," Springer Books, Springer, number 978-981-15-3785-1, November.

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