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What are the determinants of the location of foreign direct investment? The Chinese experience

by: Leonard K. Cheng, Yum K. Kwan
Journal of International Economics, Vol. 51, No. 2. (August 2000), pp. 379-400, doi:10.1016/s0022-1996(99)00032-x  Key: citeulike:1103497

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Abstract

By estimating the effects of the determinants of foreign direct investment (FDI) in 29 Chinese regions from 1985 to 1995, we find that large regional market, good infrastructure, and preferential policy had a positive effect but wage cost had a negative effect on FDI. The effect of education was positive but not statistically significant. In addition, there was also a strong self-reinforcing effect of FDI on itself. There was no convergence in the equilibrium FDI stocks of the regions between 1985 and 1995, but there was convergence in the deviations from the equilibrium FDI stocks.


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