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Why did China Benefit from a Joint Venture Policy? A Case Study of Shanghai

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  • Bernard Bishop

Abstract

Mandatory joint venture requirements have played an important role in many developing countries’ foreign investment policies. However, such policies have been criticized in some of the economic literatures on the grounds that they deter investment and lead to the development of inefficient industries. A significant amount of foreign direct investment in Shanghai has been in the form of joint ventures. Yet, by many measures, Shanghai has benefited enormously. This article argues that there are three reasons to explain Shanghai's successful use of the joint venture for its industrial development. First, local firms and industries have had the capability and willingness to learn from joint ventures and other foreign invested firms. Second, the joint venture policy has been more likely than not to have “crowded in” local investment rather than crowd it out. Third, investment authorities in Shanghai have had sufficient bureaucratic capacity and political insulation to prevent the joint venture policy from being manipulated by rent seekers.

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  • Bernard Bishop, 2007. "Why did China Benefit from a Joint Venture Policy? A Case Study of Shanghai," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(2), pages 89-103, March.
    • Handle: RePEc:bla:chinae:v:15:y:2007:i:2:p:89-103
    DOI: 10.1111/j.1749-124X.2007.00063.x
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    6. Stephen Thomsen, 1999. "Southeast Asia: The Role of Foreign Direct Investment Policies in Development," OECD Working Papers on International Investment 1999/1, OECD Publishing.
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    Cited by:

    1. Shulin Lan & Ming-Lang Tseng, 2018. "Coordinated Development of Metropolitan Logistics and Economy Toward Sustainability," Computational Economics, Springer;Society for Computational Economics, vol. 52(4), pages 1113-1138, December.
    2. CUYVERS, Ludo & SOENG, Reth & PLASMANS, Joseph & VAN DEN BULCKE, Daniël, 2008. "Productivity spillovers from foreign direct investment in the Cambodian manufacturing sector: Evidence from establishment-level data," Working Papers 2008004, University of Antwerp, Faculty of Business and Economics.
    3. Adriana Giurgiu, 2012. "Investment Incentives and the Global Competition for Capital – By K.P. Thomas," Journal of Common Market Studies, Wiley Blackwell, vol. 50(1), pages 190-190, January.

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