What are the determinants of the location of foreign direct investment? The Chinese experience

Leonard K. CHENG; Yum K. KWAN

doi:10.1016/S0022-1996(99)00032-X

What are the determinants of the location of foreign direct investment? The Chinese experience

Leonard K. CHENG^*, Yum K. KWAN

^*Corresponding author for this work

Research output: Journal Publications › Journal Article (refereed)

503 Citations (Scopus)

Abstract

By estimating the effects of the determinants of foreign direct investment (FDI) in 29 Chinese regions from 1985 to 1995, we find that large regional market, good infrastructure, and preferential policy had a positive effect but wage cost had a negative effect on FDI. The effect of education was positive but not statistically significant. In addition, there was also a strong self-reinforcing effect of FDI on itself. There was no convergence in the equilibrium FDI stocks of the regions between 1985 and 1995, but there was convergence in the deviations from the equilibrium FDI stocks. (C) 2000 Elsevier Science B.V. All rights reserved.

Original language	English
Pages (from-to)	379-400
Number of pages	22
Journal	Journal of International Economics
Volume	51
Issue number	2
DOIs	https://doi.org/10.1016/S0022-1996(99)00032-X
Publication status	Published - 1 Aug 2000
Externally published	Yes

Keywords

Dynamic panel regression
Foreign direct investment
Partial stock adjustment
Positive feedback effect
Self-reinforcing effect

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10.1016/S0022-1996(99)00032-X

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CHENG, L. K., & KWAN, Y. K. (2000). What are the determinants of the location of foreign direct investment? The Chinese experience. Journal of International Economics, 51(2), 379-400. https://doi.org/10.1016/S0022-1996(99)00032-X

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N2 - By estimating the effects of the determinants of foreign direct investment (FDI) in 29 Chinese regions from 1985 to 1995, we find that large regional market, good infrastructure, and preferential policy had a positive effect but wage cost had a negative effect on FDI. The effect of education was positive but not statistically significant. In addition, there was also a strong self-reinforcing effect of FDI on itself. There was no convergence in the equilibrium FDI stocks of the regions between 1985 and 1995, but there was convergence in the deviations from the equilibrium FDI stocks. (C) 2000 Elsevier Science B.V. All rights reserved.

AB - By estimating the effects of the determinants of foreign direct investment (FDI) in 29 Chinese regions from 1985 to 1995, we find that large regional market, good infrastructure, and preferential policy had a positive effect but wage cost had a negative effect on FDI. The effect of education was positive but not statistically significant. In addition, there was also a strong self-reinforcing effect of FDI on itself. There was no convergence in the equilibrium FDI stocks of the regions between 1985 and 1995, but there was convergence in the deviations from the equilibrium FDI stocks. (C) 2000 Elsevier Science B.V. All rights reserved.

KW - Dynamic panel regression

KW - Foreign direct investment

KW - Partial stock adjustment

KW - Positive feedback effect

KW - Self-reinforcing effect

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