Assessing the role of inward foreign direct investment in Chinese economic development, 1990-2007 : towards a synthesis of alternative views

Dic LO, Fuhai HONG, Guicai LI

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

3 Citations (Scopus)

Abstract

In the context of globalization, China has been widely regarded as the most successful country in the world in utilizing inward foreign direct investment (FDI) for economic development. The mainstream of the literature has produced a wide range of studies that are largely within the theoretical framework of neoclassical economics, and they tend to conclude that FDI has contributed significantly to Chinese economic development—through capital formation, export expansion, technology transfer, and the transformation of the economic structures and institutions. The objective of this paper is to assess the role of FDI in Chinese economic development with reference to the broader theoretical literature on FDI and late development, which encompasses structuralism and radical political economy along with neoclassical economics. From the perspectives of the broader literature, the analyses of the paper find that FDI in China has indeed promoted economic development in one respect (improving allocative efficiency), but has also had unfavourable effect in another respect (worsening productive efficiency), resulting in an overall impact that tends to be on the negative side. The mainstream story of China is thus judged to be partial, and the lessons to be drawn from the experience are arguably far more complex than have been hitherto perceived.
Original languageEnglish
Pages (from-to)107-120
Number of pages14
JournalStructural Change and Economic Dynamics
Volume37
Early online date3 Feb 2016
DOIs
Publication statusPublished - Jun 2016
Externally publishedYes

Fingerprint

Foreign direct investment
Economic development
China
Neoclassical economics
Structuralism
Productive efficiency
Allocative efficiency
Economic institutions
Economic capital
Technology transfer
Capital formation
Economic structure
Political economy
Globalization
Theoretical framework

Keywords

  • China
  • Economic development
  • FDI

Cite this

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title = "Assessing the role of inward foreign direct investment in Chinese economic development, 1990-2007 : towards a synthesis of alternative views",
abstract = "In the context of globalization, China has been widely regarded as the most successful country in the world in utilizing inward foreign direct investment (FDI) for economic development. The mainstream of the literature has produced a wide range of studies that are largely within the theoretical framework of neoclassical economics, and they tend to conclude that FDI has contributed significantly to Chinese economic development—through capital formation, export expansion, technology transfer, and the transformation of the economic structures and institutions. The objective of this paper is to assess the role of FDI in Chinese economic development with reference to the broader theoretical literature on FDI and late development, which encompasses structuralism and radical political economy along with neoclassical economics. From the perspectives of the broader literature, the analyses of the paper find that FDI in China has indeed promoted economic development in one respect (improving allocative efficiency), but has also had unfavourable effect in another respect (worsening productive efficiency), resulting in an overall impact that tends to be on the negative side. The mainstream story of China is thus judged to be partial, and the lessons to be drawn from the experience are arguably far more complex than have been hitherto perceived.",
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Assessing the role of inward foreign direct investment in Chinese economic development, 1990-2007 : towards a synthesis of alternative views. / LO, Dic; HONG, Fuhai; LI, Guicai.

In: Structural Change and Economic Dynamics, Vol. 37, 06.2016, p. 107-120.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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AB - In the context of globalization, China has been widely regarded as the most successful country in the world in utilizing inward foreign direct investment (FDI) for economic development. The mainstream of the literature has produced a wide range of studies that are largely within the theoretical framework of neoclassical economics, and they tend to conclude that FDI has contributed significantly to Chinese economic development—through capital formation, export expansion, technology transfer, and the transformation of the economic structures and institutions. The objective of this paper is to assess the role of FDI in Chinese economic development with reference to the broader theoretical literature on FDI and late development, which encompasses structuralism and radical political economy along with neoclassical economics. From the perspectives of the broader literature, the analyses of the paper find that FDI in China has indeed promoted economic development in one respect (improving allocative efficiency), but has also had unfavourable effect in another respect (worsening productive efficiency), resulting in an overall impact that tends to be on the negative side. The mainstream story of China is thus judged to be partial, and the lessons to be drawn from the experience are arguably far more complex than have been hitherto perceived.

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