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WHAT ATTRACTS FOREIGN MULTINATIONAL CORPORATIONS TO CHINA?

Authors

  • Kevin Honglin Zhang

    1. Department of Economics, Illinois State University, Normal, IL 61790-4200. E-mail khzhang@ilstu.edu
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      A different version of the article was presented at 1999 Western Economic Association International meeting at SAn Diego.I am grateful to James Dietz, coeditor of the jorrnal, and two referees for their helpful comments and suggestions. The usual caveat applies.


Abstract

After adopting the open-door policy, China experienced a boom of inward foreign direct investment (FDI) by multinational corporations. This article attempts to assess effects of location characteristics and government policies on FDI flows during the period 1987–98. A model of FDI determinants is specified and estimated with cross-section and panel data. The estimates indicate that China's huge market size, liberalized FDI regime, and improving infrastructure are attractive to multinationals. The regional distribution of FDI within China is influenced largely by FDI incentives and historical-cultural links with foreign investors, along with other location factors.

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