Region‐specific determinants of the foreign direct investment in China

David W.H. WONG, Harry F. LEE, Simon X. ZHAO, Qing PEI

Research output: Contribution to journalArticlespeer-review

Abstract

This study revisits region‐specific determinants of foreign direct investment (FDI) in Eastern, Central, and Western China using econometric and spatial analyses. It uses a data set covering 31 Chinese provinces and autonomous regions spanning the period 2005–15, together with panel data regression. Our statistical results show that in Eastern China, FDI is significantly associated with bilateral trade, orientation towards the service industry, industrialisation level, and availability of strategic assets in the region. In Central China, FDI is mainly pulled by availability of the domestic market and strategic assets in the region. In Western China, FDI inflows are mainly determined by natural resource endowment, industrialisation level, and regional innovation and production effectiveness in information and communication technology industries. Our analysis also reveals the impact of FDI in China's regional development and its capacity to hollow out the three Chinese macro‐regions. Our findings for China lead us to suggest that those governments seeking to attract FDI should not solely rely on it to facilitate local economic development and should make use of local circumstances in combination with FDI to boost their economies. Copyright © 2020 Institute of Australian Geographers.
Original languageEnglish
Pages (from-to)126-140
JournalGeographical Research
Volume58
Issue number2
Early online dateMar 2020
DOIs
Publication statusPublished - May 2020

Citation

Wong, D. W. H., Lee, H. F., Zhao, S. X., & Pei, Q. (2020). Region‐specific determinants of the foreign direct investment in China. Geographical Research, 58(2), 126-140. doi: 10.1111/1745-5871.12398

Keywords

  • China
  • Foreign direct investment
  • Hollowing-out effect
  • Locational determinant
  • Pull effect
  • Regional development

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