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Origin Effects, Spatial Dynamics and Redistribution of FDI In Guangdong, China

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Abstract

Based on panel regression analysis and interviews of 70 foreign-invested enterprises (FIEs) in 2009, this paper compares the spatial dynamics and redistribution of foreign direct investment (FDI) from Hong Kong, Taiwan, Japan and the US in Guangdong province. We found that FDI in Guangdong tends to favour cities closer to Hong Kong, with lower wage rates, better market potential and more preferential policies, and to follow the agglomeration of FDI from the same origin. The diverse home-based characteristics have resulted into the varied pathways of spatial redistribution of FDI. Hong Kong FIEs have been searching for lower-cost regions given the rise of production cost and tightened environmental regulation. In contrast, the redistribution of FIEs from Japan and Taiwan are more sensitive to their home-based business linkages, whereas Japanese and the US FIEs tend to value access to domestic market and to expand in large cities outside Guangdong.

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