Dynamics and long-run evolution of FDI in prefectural Chinese cities vis-à-vis industrial structure, GDP per capita, and population factors

Inward foreign direct investment (FDI) is crucial in stimulating economic growth through positive externalities and spillover effects, yet its uneven distribution across Chinese cities remains a significant problem. This research analyses the long-run convergence and dynamic distribution of FDI in 273 prefectural-level cities in China from 2003 to 2019. Employing a dynamic distribution approach with tools such as two-dimensional contour maps, ergodic distributions, and mobility probability plots, the research examines the convergence patterns of FDI from the perspective of city-level GDP per capita, industrial structure and population. The findings reveal significant disparities in FDI’s long-run convergence, particularly highlighting the minor role of the population relative to the more pronounced patterns observed for GDP per capita vis-à-vis services and industrial sectors orientation. The study identifies cities with FDIs significantly above or below the national average and the highest probabilities of further divergence, suggesting targeted policy interventions to address the uneven distribution of FDI.