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Privatization, FDI inflow and economic growth: evidence from China's provinces, 1978--2008

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  • Shiyong Zhao

Abstract

China's economic growth over 1978--2008 is a miracle. This article attempts to figure out and quantify the factors leading to this miracle. It is generally believed that economic reform and opening up is the key to China's economic success, but that is far from being exact and specific. This study hypothesizes that privatization and Foreign Direct Investment (FDI) inflow are the two key factors in this process. We focus on identifying the exact, specific and detailed mechanisms of privatization and FDI inflow in promoting economic growth, especially from the provincial level. Then using a panel data covering 31 provinces of Chinese mainland over 1978--2008, we find statistically significant evidence to support our hypotheses. We predict that further economic growth depends on further privatization and opening up, that is, depends on denationalization of the economy.

Suggested Citation

  • Shiyong Zhao, 2013. "Privatization, FDI inflow and economic growth: evidence from China's provinces, 1978--2008," Applied Economics, Taylor & Francis Journals, vol. 45(15), pages 2127-2139, May.
    • Handle: RePEc:taf:applec:45:y:2013:i:15:p:2127-2139
    DOI: 10.1080/00036846.2012.654916
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    References listed on IDEAS

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    1. David D. Li & Changqi Wu, 2002. "The Ownership School vs. the Management School of State Enterprise Reform: Evidence from China," William Davidson Institute Working Papers Series 435, William Davidson Institute at the University of Michigan.
    2. Raymond W. Goldsmith, 1951. "A Perpetual Inventory of National Wealth," NBER Chapters, in: Studies in Income and Wealth, Volume 14, pages 5-73, National Bureau of Economic Research, Inc.
    3. Robert W. Fogel, 2006. "Why China is Likely to Achieve its Growth Objectives," NBER Working Papers 12122, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Faik Bilgili & Nadide S. Tülüce & Ibrahim Doğan & H. Hilal Bağlıtas, 2016. "The causality between FDI and sector-specific production in Turkey: evidence from threshold cointegration with regime shifts," Applied Economics, Taylor & Francis Journals, vol. 48(5), pages 345-360, January.
    2. Beatriz Cuadrado-Ballesteros & Noemí Peña-Miguel, 2018. "The Socioeconomic Consequences of Privatization: An Empirical Analysis for Europe," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(1), pages 163-183, August.
    3. Luca Gattini & Tamar Baiashvili, 2026. "Examining the heterogeneous impact of FDI across income groups: do commodity intensity and institutional quality matter?," International Economics and Economic Policy, Springer, vol. 23(1), pages 1-39, February.
    4. David A. Ralston & Carolyn P. Egri & Charlotte M. Karam & Yongjuan Li & Ping Ping Fu, 2018. "Changes in work values across the regions of China," Asia Pacific Journal of Management, Springer, vol. 35(1), pages 145-179, March.
    5. Miao Wang & M. C. Sunny Wong, 2016. "Effects of Foreign Direct Investment on Firm-level Technical Efficiency: Stochastic Frontier Model Evidence from Chinese Manufacturing Firms," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 335-361, September.
    6. Te Bao & Yun Dai & Yanxiang Feng & Shuai Liu & Ruixin Wang, 2023. "Trade liberalisation and trade and capital flows: Evidence from China pilot free trade zones," The World Economy, Wiley Blackwell, vol. 46(5), pages 1408-1422, May.
    7. Apergis, Nicholas & Poufinas, Thomas, 2020. "The role of insurance growth in economic growth: Fresh evidence from a panel of OECD countries," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    8. Jian, Jianhui & Fan, Xiaojie & Zhao, Shiyong & Zhou, Dong, 2021. "Business creation, innovation, and economic growth: Evidence from China’s economic transition, 1978–2017," Economic Modelling, Elsevier, vol. 96(C), pages 371-378.
    9. Ahmed MUSABEH & Mehdi ZOUAOUI, 2020. "Policies and Variables affecting FDI: A Panel Data Analysis of North African Countries," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 7(1), pages 1-20, January.
    10. Shiyong Zhao, 2024. "Foreign business presence and local entrepreneurship development: evidence from China," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.

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