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Does the pilot free trade zone policy attract the entering of foreign-invested enterprises? The evidence from China

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  • Hao Chen
  • Bo Yuan
  • Qi Cui

Abstract

As an essential policy experiment initiated by the Chinese government, the pilot free trade zone (FTZ) policy aims to attract foreign investment and accelerate China’s economic growth. However, its full effects on the entering of foreign-investment enterprises are still inadequately understood. This article, employing the panel data of China’s prefecture-level cities from 2009 to 2017, empirically examines the effects of the pilot FTZs on attracting the entering of foreign-invested enterprises with a difference-in-difference (DID) regression. With a parallel trend test, the results disclose that the pilot FTZs can significantly attract the entering of foreign-invested enterprises. The yearly number of newly-registered foreign-invested enterprises can increase by over 90% if the city enforces the pilot FTZ policy. Besides, the heterogeneous effects of pilot FTZs are analysed, unveiling that the cities with implementation of the Special Economic Zone policy in earlier years would have much larger effects. In particular, the recently established pilot FTZs appear to have insignificant effects on attracting the entering of foreign-invested enterprises, probably due to the time-lag effects on the implementation of the FTZ policy and the progressive perfecting of supportive policies.

Suggested Citation

  • Hao Chen & Bo Yuan & Qi Cui, 2021. "Does the pilot free trade zone policy attract the entering of foreign-invested enterprises? The evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 28(14), pages 1162-1168, August.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:14:p:1162-1168
    DOI: 10.1080/13504851.2020.1803482
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    Cited by:

    1. Chen, Wanling & Hu, Yao & Liu, Bei & Wang, Hui & Zheng, Mingbo, 2022. "Does the establishment of Pilot Free Trade Test Zones promote the transformation and upgradation of trade patterns?," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 114-128.
    2. Feng, Wei & Sun, Shujun & Yuan, Hang, 2023. "Research on the efficiency of factor allocation in the pilot free trade zones," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 727-745.
    3. Bo Yuan & Qiuyue Yin, 2024. "Does green foreign investment contribute to air pollution abatement? Evidence from China," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(2), pages 912-938, March.
    4. Guan, Chenghua & Huang, Jinyuan & Jiang, Ruyue & Xu, Wanting, 2023. "The impact of pilot free trade zone on service industry structure upgrading," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 472-491.
    5. Xu, Shiteng & Shen, Ronghua & Zhang, Yahua & Cai, Yifei, 2024. "Fostering regional innovation efficiency through pilot free trade zones: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 356-367.
    6. Li, Zhaohua & Pang, Suqin & Zhu, Zhiyun, 2024. "The impact of pilot free trade zones on entrepreneurship: Evidence from a quasi-natural experiment in China," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    7. Guo, Qingbin & Zhong, Jinrong, 2022. "The effect of urban innovation performance of smart city construction policies: Evaluate by using a multiple period difference-in-differences model," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    8. Tingru Zhao & Feng He, 2022. "Does the Pilot Free Trade Zone Promote the Quality of Urban Economic Growth: An Empirical Research Based on Quasi-Natural Experiment," Sustainability, MDPI, vol. 14(12), pages 1-14, June.
    9. Zeng, Jing & Zhang, Bingqian & Li, Kevin K., 2024. "The impact of free trade zones on ESG performance: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 1110-1122.
    10. Yan, Xiaolei & He, Taiyi & Qian, Pengcheng & Liu, Zhongwen, 2024. "Does the construction of Pilot Free Trade Zones promote the development of green economy? - A quasi-natural experiment evidence from China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 208-224.
    11. Shanqing Liu & Shaolong Wang & Huwei Wen & Congxian He & Huan Liu, 2024. "Public support policies and entrepreneurship in less-developed areas: a study of China’s revolutionary base areas," Economic Change and Restructuring, Springer, vol. 57(4), pages 1-29, August.
    12. Yuan Feng & Ying Li & Changfei Nie, 2023. "The Effect of Place-Based Policy on Urban Land Green Use Efficiency: Evidence from the Pilot Free-Trade Zone Establishment in China," Land, MDPI, vol. 12(3), pages 1-19, March.
    13. Qingshan Ma & Yuanmeng Zhang & Kexin Yang & Lingyun He, 2021. "Have China’s Pilot Free Trade Zones Improved Green Total Factor Productivity?," IJERPH, MDPI, vol. 18(21), pages 1-20, November.
    14. Xin Su & Shengwen Wang, 2024. "Impact of China’s free trade zones on the innovation performance of firms: evidence from a quasi-natural experiment," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.

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