Distribution of FDI across China – common policies but differing impacts by region
| Published date | 21 June 2011 |
| Date | 21 June 2011 |
| Pages | 125-138 |
| DOI | https://doi.org/10.1108/17544401111143463 |
| Author | M. John Foster |
| Subject Matter | Economics |
Distribution of FDI across
China – common policies but
differing impacts by region
M. John Foster
Emeritus Fellow, Kingston Business School, Kingston Upon Thames, UK
Abstract
Purpose – The aim of this paper is to illustrate how differing policy instruments linked to foreign
direct investment (FDI) into China may have very different impacts. The paper looks at: patterns of
FDI across China and other key, emerging nations; FDI patterns across the three declared,
developmental regions of the People’s Republic of China (PRC); and the effectiveness of four of the PRC
Government’s policy measures aimed at promoting FDI, and highlights the unexpectedly differing
outcomes which can emerge from those incentives.
Design/methodology/approach – The initial patterns draw on published data of the relevant
countries and of the China’s three designated development regions. The problem of differing, and
unexpected, impacts is examined by means of four mini-cases, drawing on previously published work
and featuring a number of locations.
Findings – China is near the top of the list of FDI recipients, but its relative success compared with
other developing economies is more modest. FDI into China is heavily skewed in favour of the richest
east region, the poor west being the weakest attractor. The mini-cases show how the same policy can
have very different and sometimes unintended outcomes in different areas. A recurring theme is the
existence of common, systemic problems for investors, which may be seen as “grit” in China’s
economic system.
Practical implications – The PRC Government should reflect on what its investment policies may
actually deliver as well as their initial intent and to seek to ensure consistent implementation across
the country.
Originality/value – The originality of the work lies in the interpretation of existing information: the
location of “hidden truths”.
Keywords Foreign directinvestment, Regions, PRC, Incentiveschemes, Outcomes, China
Paper type General review
Introduction
China and its more recent, emergent economy rival, India have become major magne ts
for foreign direct investment (FDI) in recent years, prior to the sudden dip of the new
(2008/2009) global recession, which has led to sharply adjusted, global patterns of FDI
flows in 2009. China has, over the past 30 years, put in place a range of measures, which
may be seen as potential incentives to foreign investors, and indeed to domestic
investors too, at both national level and “provincial” level (The term is shown in
parentheses since it is used to include autonomous regions and major municipalities,
such as Beijing, which have reporting lines similar to those for provinces.). One of the
interesting things to emerge from this context is that some very different outcome s can
be observed albeit the nominal incentives may be very similar.
This paper looks first at patterns of FDI across a small set of key, emerging nations,
including China and India (section “FDI trends globally and in BIC”) and across the
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1754-4408.htm
Distribution of
FDI across China
125
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 4 No. 2, 2011
pp. 125-138
qEmerald Group Publishing Limited
1754-4408
DOI 10.1108/17544401111143463
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