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Financial Sector Development, FDI and Economic Growth in China

  • Christer Ljungwall

    (China Centre for Economic Research)

  • Junjie Li
Registered author(s):

    The economics-literature, drawing on endogenous growth theory, suggests that the level of financial sector development may influence foreign direct investment and its impact on the diffusion of technology in the host country, thereby increasing the rate of economic growth. Little attention, however, has been devoted to confirm or reject this link for China. This paper fills the gap by including measures of financial sector development in this growth regression. The Generalised Method of Moments system estimation is applied to data for 28 Chinese provinces over the period 1986-2003. We show that the interaction between foreign direct investment and indicators measuring the degree of market oriented financing enhance economic growth.

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    File URL: http://acjer.eaber.org/node/22026
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    Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 22026.

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    Date of creation: Aug 2007
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    Handle: RePEc:eab:financ:22026
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