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FDI and market entry/exit: Evidence from China

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  • Anwar, Sajid
  • Sun, Sizhong

Abstract

This paper considers the impact of FDI and FDI-related spillovers on the entry and exit rates of domestic firms in mainland China's manufacturing sector. Since we suspect that aggregate results obscure differing effects based on the source of the FDI, we disaggregate FDI into that originating from Hong Kong, Macau and Taiwan (HMT) area and the rest of the world. The empirical analysis, based on 4-digit industry level panel data over the period 2003–2007, reveals that FDI originating from the rest of the world has made a significant contribution to the entry rate of domestic firms in China and the spillover effect arising from backward linkages is also positive and significant. However, FDI originating from HMT area has not encouraged domestic entry, whilst it has contributed to an increase in the exit rate of domestic firms.

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  • Anwar, Sajid & Sun, Sizhong, 2012. "FDI and market entry/exit: Evidence from China," Journal of Asian Economics, Elsevier, vol. 23(5), pages 487-498.
    • Handle: RePEc:eee:asieco:v:23:y:2012:i:5:p:487-498
    DOI: 10.1016/j.asieco.2012.04.003
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    Cited by:

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    6. Hien T. N. Huynh & Phuong V. Nguyen & Hoa D. X. Trieu & Khoa T. Tran, 2021. "Productivity Spillover from FDI to Domestic Firms across Six Regions in Vietnam," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(1), pages 59-75, January.
    7. Arimoto, Yutaka & Lee, Changmin, 2014. "Did Japanese direct investment in Korea suppress indigenous industrialization in the 1930s? : evidence from country-level factory entry patterns," IDE Discussion Papers 450, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    8. Fang, Jing & Collins, Alan & Yao, Shujie, 2021. "On the global COVID-19 pandemic and China’s FDI," Journal of Asian Economics, Elsevier, vol. 74(C).
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    12. Wang, Daili, 2013. "鼓励还是抑制？初探外商直接投资与新民营企业进入 [Foreign Direct Investment and the Entry of New Firms]," MPRA Paper 50984, University Library of Munich, Germany.
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    More about this item

    Keywords

    FDI; FDI-linked spillovers; Entry and exit of firms; China;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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