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Determinants of Foreign Direct Investment in China: A Sectoral Analysis

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  • Owen C. H. Ho

    (UWA Business School, The University of Western Australia)

Abstract

This study contributes to the existing literature by examining the determinants of foreign direct investment at the sectoral level in the Chinese economy. A review of foreign investment policy in China and China’s inward FDI in presented. The empirical analysis in this study is based on the pooled data of 13 sectors for China and 9 sectors for Guangdong province over the period from 1997 to 2002. The findings indicate that market size, wage rate, degree of economic reform and innovation activities are important determinants of sectoral FDI in China. Except for the innovation factor, the other three factors are also significant for Guangdong province. Overall, the findings reveal that (i) high labour cost and state ownership might deter the inflow of sectoral FDI; (ii) the large market size encourages inward foreign investments in both China and Guangdong province; (iii) high innovation activities attract FDI in China, but have no effect in Guangdong province and (iv) the elasticity of market size and labour wage in Guangdong province is greater than that in China as a whole.

Suggested Citation

  • Owen C. H. Ho, 2004. "Determinants of Foreign Direct Investment in China: A Sectoral Analysis," Economics Discussion / Working Papers 04-18, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:04-18
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    References listed on IDEAS

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    Cited by:

    1. Priya Gupta & Archana Singh, 2016. "Determinants of Foreign Direct Investment Inflows in BRICS Nations: A Panel Data Analysis," Emerging Economy Studies, International Management Institute, vol. 2(2), pages 181-198, November.

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    More about this item

    Keywords

    Foreign direct investment; sectoral analysis; economic reform; Chinese economy;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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