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 PublicationsJournal Article (refereed)peer-review

613 Citations (Scopus)


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 languageEnglish
Pages (from-to)379-400
Number of pages22
JournalJournal of International Economics
Issue number2
Publication statusPublished - 1 Aug 2000
Externally publishedYes


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

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