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EU-China and the non-transparent race for inward FDI

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  • Oxelheim, Lars
  • Ghauri, Pervez

Abstract

In this paper it is argued that the restructuring following the stiffer competition stemming from increased global integration will trigger a race between countries to attract inward foreign direct investment (FDI). It is further argued that this race consists of last minute efforts and tailor-made packages designed by governments and their agencies to temporarily improve their country's otherwise inferior profile. This race is non-transparent and the factors used to compete for inward FDI (the 'elements' of the race) deviate from those of long-term efforts to develop a favourable investment climate and improve productivity, as well as medium-term efforts such as lowering corporate taxes. The paper elaborates on the research problem of properly understanding the drivers of inward FDI in the absence of data on the elements of the non-transparent race. It also addresses the economic policy problem following from this race with a scenario where a large share of global FDI ends up in China, putting the cohesion of the European Union (EU) at stake and triggering a regional race within China.

Suggested Citation

  • Oxelheim, Lars & Ghauri, Pervez, 2008. "EU-China and the non-transparent race for inward FDI," Journal of Asian Economics, Elsevier, vol. 19(4), pages 358-370, August.
    • Handle: RePEc:eee:asieco:v:19:y:2008:i:4:p:358-370
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    References listed on IDEAS

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    Cited by:

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    2. Ghauri, Pervez N. & Oxelheim, Lars & Randøy, Trond, 2023. "The Changed Geopolitical Map: Implications for Business Policy in a Sustainable Finance Perspective," Working Paper Series 1465, Research Institute of Industrial Economics.
    3. Uddin, Moshfique & Chowdhury, Anup & Zafar, Sheeba & Shafique, Sujana & Liu, Jia, 2019. "Institutional determinants of inward FDI: Evidence from Pakistan," International Business Review, Elsevier, vol. 28(2), pages 344-358.
    4. Oxelheim, Lars, 2010. "Globalization, transparency and economic growth: The vulnerability of Chinese firms to macroeconomic shocks," Journal of Asian Economics, Elsevier, vol. 21(1), pages 66-75, February.
    5. Blevins, Dane P. & Moschieri, Caterina & Pinkham, Brian C. & Ragozzino, Roberto, 2016. "Institutional changes within the European Union: How global cities and regional integration affect MNE entry decisions," Journal of World Business, Elsevier, vol. 51(2), pages 319-330.
    6. Wencong Lu & Ikboljon Kasimov & Ibrokhim Karimov & Yakhyobek Abdullaev, 2020. "Foreign Direct Investment, Natural Resources, Economic Freedom, and Sea-Access: Evidence from the Commonwealth of Independent States," Sustainability, MDPI, vol. 12(8), pages 1-18, April.
    7. Sun, Ling & Fulginiti, Lilyan E. & Chen, Yo-Chan, 2010. "Taiwanese industry competitiveness when outward FDI is defensive," Journal of Asian Economics, Elsevier, vol. 21(4), pages 365-377, August.
    8. Iqra Hassan Mohamud & Ahmed Abdirashid Mohamud, 2023. "The Impact of Renewable Energy Consumption and Economic Growth on Environmental Degradation in Somalia," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 533-543, September.

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    More about this item

    Keywords

    Inward FDI China European Union Investment-diverting policies;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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