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Foreign Direct Investment and Economic Growth: Theory and Application to China

Author

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  • Jean‐Claude Berthélemy
  • Sylvie Démurger

Abstract

The paper investigates the relationship between foreign direct investment and economic growth. A model of endogenous growth first highlights the transfer of foreign technology as a key determinant of economic growth, and suggests that economic growth may conversely influence the inflows of foreign capital. Simultaneous‐equation model estimation based on a sample of 24 Chinese provinces, from 1985 to 1996, confirms the fundamental role played by foreign investment in provincial economic growth in China, and stresses the importance of potential growth in foreign investment decisions.

Suggested Citation

  • Jean‐Claude Berthélemy & Sylvie Démurger, 2000. "Foreign Direct Investment and Economic Growth: Theory and Application to China," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 140-155, June.
    • Handle: RePEc:bla:rdevec:v:4:y:2000:i:2:p:140-155
    DOI: 10.1111/1467-9361.00083
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    Cited by:

    1. Cécile BATISSE & Mary-Françoise RENARD & Nasser ARY TANIMOUNE, 2013. "Foreign Direct Investment across China: what should we learn from spatial dependences?," Working Papers 201312, CERDI.
    2. Madhabendra Sinha & Partha Pratim Sengupta, 2022. "FDI Inflow, ICT Expansion and Economic Growth: An Empirical Study on Asia-Pacific Developing Countries," Global Business Review, International Management Institute, vol. 23(3), pages 804-821, June.
    3. Palaniaandy, Ayappan & Chin, Lee, 2018. "Intellectual Property Rights, Foreign Direct Investment and Economic Growth," MPRA Paper 118780, University Library of Munich, Germany.
    4. Cuihong, Yang & Yuwan, Duan & Kunfu, Zhu & Xikang, Chen, 2013. "Contributions of FIEs to China’s Economy Using an Input-Output Model Capturing Processing Trade with Ownership Distinction," Conference papers 332355, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Nguyen-Huu, Thanh Tam & Pham, Ngoc-Sang, 2021. "Escaping the middle income trap and getting economic growth: How does FDI can help the host country?," MPRA Paper 106151, University Library of Munich, Germany.
    6. Sandra Poncet & Felipe Starosta, 2013. "Export upgrading and growth in China: the prerequisite of domestic embeddedness," PSE - G-MOND WORKING PAPERS halshs-00960684, HAL.
    7. Byaro, Mwoya & Pelizzo, Riccardo & Kinyondo, Abel, 2023. "What are the Main Drivers Behind the Acceleration of Tanzania's Economic Growth Over the Past Three Decades?," African Journal of Economic Review, African Journal of Economic Review, vol. 11(4), June.
    8. Caihong Tang & Anitha Rosland & Rizwana Yasmeen & Yunfei Long, 2024. "The threshold analysis of economic growth, FDI and trade on environment pollution in China using provincial panel data," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(10), pages 25071-25090, October.
    9. Mohammed B. Yusoff & Ruslee Nuh, 2015. "Foreign Direct Investment, Trade Openness and Economic Growth," Foreign Trade Review, , vol. 50(2), pages 73-84, May.
    10. Canfei He & Fenghua Pan, 2010. "Economic Transition, Dynamic Externalities and City-industry Growth in China," Urban Studies, Urban Studies Journal Limited, vol. 47(1), pages 121-144, January.
    11. Syed Ali Raza & Mohd Zaini Abd Karim, 2018. "Influence of Systemic Banking Crises and Currency Crises on the FDI-Growth Nexus: Evidence from China," Global Business Review, International Management Institute, vol. 19(3), pages 572-589, June.

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