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How Foreign Direct Investment Promotes Development: The Case of the People’s Republic of China’s Inward and Outward FDI

Author

Listed:
  • Li, Zhongmin

    (Chinese Academy of Social Sciences)

Abstract

In the last 33 years after the People’s Republic of China’s (PRC) openness and reform, huge amounts of foreign direct investment (FDI) flowed into the PRC. The capital inflow and technology spillover in turn enabled outward FDI from the PRC. This paper gives a brief introduction to the PRC’s inward and outward FDI, including their determinants, motives, main characteristics, and impact on the PRC and host countries. Inward FDI contributes to the PRC’s economic growth and industry development, increases tax revenue, and improves labor quality. The contribution of inward FDI to gross domestic product averages around 3%–6%. At the same time, outward FDI improves the PRC’s dynamic efficiency, and helps the host countries with capital inflow and infrastructure improvement. Based on the PRC’s experience, four policy issues are proposed: dynamic mechanism inside FDI, investment liberalization, international coordination, and trade-related policy.

Suggested Citation

  • Li, Zhongmin, 2013. "How Foreign Direct Investment Promotes Development: The Case of the People’s Republic of China’s Inward and Outward FDI," ADB Economics Working Paper Series 304, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0304
    Note: http://www.adb.org/sites/default/files/pub/2013/economics-wp304-fdi-promotes-development-prc.pdf
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    Citations

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    Cited by:

    1. Hidaya EL Khattabi & Mohamed Karim, 2018. "Impact of Morocco-ECOWAS Economic Relations on Economic Growth in Morocco: An Analysis Using the ARDL Model," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(5), pages 105-113, May.
    2. Hsiu-Ling Wu & Chien-Hsun Chen & Yi-Rou Chen, 2021. "Factors Influencing China’s Outward Foreign Direct Investment," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 15(3), pages 299-319, August.
    3. Lo, Dic & Hong, Fuhai & Li, Guicai, 2016. "Assessing the role of inward foreign direct investment in Chinese economic development, 1990–2007: Towards a synthesis of alternative views," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 107-120.
    4. Bijun Wang & Rui Mao & Qin Gou, 2014. "Overseas Impacts of China's Outward Direct Investment," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(2), pages 227-249, July.
    5. Hilda Yanuar Jong, 2022. "The Art of Trade War: Spurring Investments in Indonesia Amidst the US–China Trade War," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(2), pages 204-221, May.
    6. Ralph Vezembouua Marenga & Lesley Blaauw & Omu Kakujaha-Matundu, 2023. "Analysing the Scope of Local Authorities (LAs) in Facilitating and Influencing the Sustainability of Foreign Direct Investment in Namibia: A Case Study of the Windhoek and Walvis Bay LAs," Sustainability, MDPI, vol. 15(2), pages 1-18, January.
    7. Jong, Hilda Yanuar, 2022. "The art of trade war: spurring investments in Indonesia amidst the US–China trade war," LSE Research Online Documents on Economics 114464, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    FDI; PRC; South–South investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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