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Foreign direct investment, domestic sales and exports of local firms: a regional perspective from China

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  • Sajid Anwar
  • Sizhong Sun

Abstract

Using a simultaneous equations model, this paper investigates how/whether the presence of foreign direct investment (FDI) affects the performance of local firms in China's (1) leather shoe manufacturing and (2) textile and garment manufacturing industries. We use the value of sales (total revenue) as a measure of firm performance in domestic and export markets. The distinguishing feature of this paper is the use of an FDI presence measure that takes the regional dimension into account. The empirical analysis presented in this paper reveals that the presence of FDI leads to a significant positive impact on the domestic sales and export intensity of local firms in both industries. This result is found to be robust to alternative measures of FDI. Based on the result, it is recommended that, in order to maximize the benefits from inward FDI, Chinese policy-makers must encourage domestic and foreign-invested firms to locate in close geographical proximity.

Suggested Citation

  • Sajid Anwar & Sizhong Sun, 2016. "Foreign direct investment, domestic sales and exports of local firms: a regional perspective from China," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 21(3), pages 325-338, July.
    • Handle: RePEc:taf:rjapxx:v:21:y:2016:i:3:p:325-338
    DOI: 10.1080/13547860.2016.1176640
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    Cited by:

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    2. Hazwan Haini, 2020. "Examining the relationship between finance, institutions and economic growth: evidence from the ASEAN economies," Economic Change and Restructuring, Springer, vol. 53(4), pages 519-542, November.
    3. Radovan Kastratović, 2020. "The impact of foreign direct investment on host country exports: A meta‐analysis," The World Economy, Wiley Blackwell, vol. 43(12), pages 3142-3183, December.

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