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The Effect of China's Rise on FDI Competition in East Asia: Crowding‐out or Crowding‐in?
Author(s) -
Sohn ChanHyun
Publication year - 2016
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/sjpe.12113
Subject(s) - china , foreign direct investment , competition (biology) , crowding out , economics , east asia , international economics , panel data , international trade , gravity model of trade , monetary economics , macroeconomics , geography , econometrics , ecology , biology , archaeology
This paper investigates the China Effect on FDI competition in East Asia: Does China's FDI crowd out or crowd in FDI s in ASEAN countries? Previous research utilized a gravity equation that has no theoretical foundation for FDI flows. This study applies a theory‐based Knowledge ‐ Capital Model modified to incorporate preferential market‐openings by FTA s and BIT s that directly affect investment and trade costs. Using country‐pair data for China and ASEAN with 34 OECD home countries during 1985–2010, panel analyses are performed. The results suggest that China's rise does not threaten ASEAN countries but induces a strong synergetic effect on FDI s into them. In attracting FDI inflows, China and ASEAN countries are friends, not foes.