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Assessing the banking intermediation and inward foreign direct investment in China

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  • Jean-Claude Maswana

Abstract

The present tests the causal interactions between foreign direct investment (FDI) and banking intermediation in China, the results showed that real interest rates Granger-caused FDI inflows, while the latter led service sector's value added. Interestingly, interest rate spread and FDI mutually influenced each other. Contrary to conventional wisdom, FDI inflows have been found to be more influenced by opportunity costs in the banking sector (interest rate structure). The results suggest that growing FDI inflows in China might have contributed in hindering the development of banking intermediation. Eventually, this finding spotlights the need for liberalisation of the entire interest rate and recomposition of capital inflows.

Suggested Citation

  • Jean-Claude Maswana, 2010. "Assessing the banking intermediation and inward foreign direct investment in China," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 2(5), pages 329-340.
    • Handle: RePEc:ids:ijecbr:v:2:y:2010:i:5:p:329-340
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    Cited by:

    1. Albulescu, Claudiu Tiberiu & Ionescu, Adrian Marius, 2018. "The long-run impact of monetary policy uncertainty and banking stability on inward FDI in EU countries," Research in International Business and Finance, Elsevier, vol. 45(C), pages 72-81.

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