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Foreign direct investment and regional inequality in China

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  • Kailei Wei
  • Shujie Yao
  • Aying Liu

Abstract

One downside effect of rapid economic growth in China has been the ever rising inter-regional inequality. Foreign direct investment (FDI) has been blamed for driving the Chinese regions apart. It is difficult to reconcile the positive effect of FDI on economic growth with its potential ‘negative’ effect on regional inequality. Using the largest panel dataset for the Chinese regions over 1979-2003 and employing an augmented Cobb-Douglas production function, this paper proves that FDI has been an important factor of economic growth in China. It also suggests that it is the uneven distribution of FDI instead of FDI itself that has caused regional growth differences.

Suggested Citation

  • Kailei Wei & Shujie Yao & Aying Liu, 2007. "Foreign direct investment and regional inequality in China," Discussion Papers 07/32, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:07/32
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    References listed on IDEAS

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    Cited by:

    1. Yuqing Xing, 2008. "FDI in China: Facts and Impacts on China and the World Economy," Working Papers EMS_2008_03, Research Institute, International University of Japan.
    2. Jingmei Ma & Hongyu Jia, 2015. "The Role of Foreign Direct Investment on Income Convergence in China after Early 1990s from a Spatial Econometric Perspective," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 829-842, November.

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