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Foreign direct investment in China: Policy, recent trend and impact

Author

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  • K. C. Fung
  • Hitomi Iizaka
  • Sarah Tong

Abstract

One of the most important elements of China's economic reform has been the promotion of foreign direct investment (FDI) inflow. Government polices on FDI have gone through different stages in their main objectives since the late-1970s, from gradually opening to foreign investors, to actively encouraging inward investment, directing FDI in accordance with domestic industrial restructuring, and complying with China's World Trade Organization (WTO) obligations. FDI in China has experienced rapid growth especially since the mid-1990s, as well as structural change. Most of the earlier investments were small scale, labor-intensive and export-oriented. In recent years, more investment has been large scale and more capital and technology intensive, aiming at both domestic and export markets. Moreover, increasingly more investment has come from the industrial world, and has located along the eastern coastal regions, in additional to the two southeastern provinces. FDI has played a crucial role in China's rapid growth, economic transition, and, mostly importantly, integration with the world. China's recent accession to the WTO provides more incentives to foreign investors. At the same time, it will also result in more intense competition for domestic firms.

Suggested Citation

  • K. C. Fung & Hitomi Iizaka & Sarah Tong, 2004. "Foreign direct investment in China: Policy, recent trend and impact," Global Economic Review, Taylor & Francis Journals, vol. 33(2), pages 99-130.
    • Handle: RePEc:taf:glecrv:v:33:y:2004:i:2:p:99-130
    DOI: 10.1080/12265080408449850
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    Citations

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    Cited by:

    1. Eichengreen, Barry & Tong, Hui, 2007. "Is China's FDI coming at the expense of other countries?," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 153-172, June.
    2. Long, Cheryl & Yang, Jin & Zhang, Jing, 2015. "Institutional Impact of Foreign Direct Investment in China," World Development, Elsevier, vol. 66(C), pages 31-48.
    3. Qing Xie & Hua Yin, 2023. "Institutional Differences and the Choice of Outward Foreign Direct Investment Mode under the “Belt and Road” Initiative: Experience Analysis Based on China’s Manufacturing Enterprises," Sustainability, MDPI, vol. 15(9), pages 1-26, April.
    4. Justin Tan, 2009. "Institutional Structure and Firm Social Performance in Transitional Economies: Evidence of Multinational Corporations in China," Journal of Business Ethics, Springer, vol. 86(2), pages 171-189, March.
    5. Liew, Siew-Ling, 2016. "Determinants of Foreign Direct Investment," MPRA Paper 70447, University Library of Munich, Germany.
    6. Ainura Uzagalieva & Evžen Kocenda & Antonio Menezes, 2010. "Technological Imitation and Innovation in New European Union Markets," CESifo Working Paper Series 3039, CESifo.
    7. Greaney, Theresa M. & Li, Yao & Tu, Dongmei, 2017. "Pollution control and foreign firms’ exit behavior in China," Journal of Asian Economics, Elsevier, vol. 48(C), pages 148-159.
    8. Liew, Siew-Ling, 2016. "Review on Determinants of Capital Flight," MPRA Paper 70445, University Library of Munich, Germany.
    9. XU, Bin & LU, Jiangyong, 2009. "Foreign direct investment, processing trade, and the sophistication of China's exports," China Economic Review, Elsevier, vol. 20(3), pages 425-439, September.
    10. Jeon, Yongbok & Park, Byung Il & Ghauri, Pervez N., 2013. "Foreign direct investment spillover effects in China: Are they different across industries with different technological levels?," China Economic Review, Elsevier, vol. 26(C), pages 105-117.
    11. Yuqing Xing, 2008. "FDI in China: Facts and Impacts on China and the World Economy," Working Papers EMS_2008_03, Research Institute, International University of Japan.
    12. Matsumoto, Hidenobu & Domae, Koji & O'Connor, Kevin, 2016. "Business connectivity, air transport and the urban hierarchy: A case study in East Asia," Journal of Transport Geography, Elsevier, vol. 54(C), pages 132-139.
    13. Zhao, Jingfeng & Tang, Jianmin, 2018. "Industrial structure change and economic growth: A China-Russia comparison," China Economic Review, Elsevier, vol. 47(C), pages 219-233.
    14. Bo Chen & Yao Li & Yuming Yin, 2016. "FDI, Industry Heterogeneity and Employment Elasticity in China," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 189-200, February.
    15. Farrukh Nawaz Kayani, 2017. "A Comparative Study Upon Chinese And Turkish Inward Foreign Direct Investment," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 5(1), pages 69-77.
    16. Grigori Feiguine & Julia Solovjova, 2014. "ICT Modernization and Globalization: Russian Perspectives," EIIW Discussion paper disbei199, Universitätsbibliothek Wuppertal, University Library.
    17. Barry EICHENGREEN & Hui TONG, 2006. "How China is Reorganizing the World Economy," Asian Economic Policy Review, Japan Center for Economic Research, vol. 1(1), pages 73-97, June.

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