Open AccessThe Determinants And Structural Change Of FDI In China A Study Based On City-Level Panel Data
Author(s) -
Yu Liang
Publication year - 2015
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v31i4.9334
Subject(s) - foreign direct investment , china , panel data , government (linguistics) , economics , economies of agglomeration , economic geography , variable (mathematics) , sample (material) , business , market size , international economics , economic growth , econometrics , macroeconomics , geography , mathematical analysis , linguistics , philosophy , chemistry , mathematics , archaeology , chromatography
As one of the important developing countries, China has experienced a tremendous amount of economic growth in the past 30 years. This in turn has attracted a huge amount of foreign direct investment (FDI) into the country. However, according to past literature, FDI location is imbalance in China. Building upon this finding, this paper attempts to identify factors affecting the location determinants of FDI in China. By introducing spatial variable into the analysis, this paper measures the agglomeration effect of a city level data. The results show that the spatial variable (market potential factor), plays a significant role in FDI flows. Also I find that previous FDI flow, market potential factor, infrastructure construction, government preferential policies and coastal location can attract FDI flow. While higher wages and education level effects are not clear. By separating the data into two sub-sample periods (1996-2002 and 2003-2008), I find that in response to the transformation of the economic situation, foreign investors shift their investment direction into regions with high education and high income level. This observation is different to previous studies. This study provides deeper perspective on the factors that attract FDI flows to China, and how the transformation of the economic environment change the direction of FDI flows.