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Is FDI into China Crowding Out FDI into the European Union?

  • Resmini, Laura
  • Siedschlag, Iulia

    (Economic and Social Research Institute (ESRI))

We estimate an augmented gravity panel model to analyse the effects of FDI into China originating in OECD countries on FDI into EU and other countries over the period 1990-2004. Our results suggest that on average, ceteris paribus, over the analysed period, FDI inflows into China have been complementary to FDI inflows into EU15 countries but they have substituted FDI into the new EU countries in Central and Eastern Europe. In particular, small economies such as Bulgaria and the Baltic countries have been affected negatively by the surge in the FDI into China. This FDI diversion appears in the case of efficiency-seeking FDI.

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Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number DYNREG25.

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Date of creation: 2008
Date of revision:
Handle: RePEc:esr:wpaper:dynreg25
Note: DYNREG Research Project - Dynamic Regions in a Knowledge-Driven Global Economy: Lessons and Policy Implications for the European Union
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  1. Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(5), pages 764-782, 05.
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  3. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
  4. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
  5. Shang-Jin Wei & Eswar Prasad, 2005. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," IMF Working Papers 05/79, International Monetary Fund.
  6. Karolina Ekholm,, . "Factor Endowments and the Pattern of Affiliate Production by Multinational Enterprises," Discussion Papers 97/19, University of Nottingham, CREDIT.
  7. Stein, Ernesto & Daude, Christian, 2007. "Longitude matters: Time zones and the location of foreign direct investment," Journal of International Economics, Elsevier, vol. 71(1), pages 96-112, March.
  8. Scott L. Baier & Jeffrey H. Bergstrand, 2005. "Do free trade agreements actually increase members’ international trade?," FRB Atlanta Working Paper No. 2005-03, Federal Reserve Bank of Atlanta.
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