What Determines Inward FDI in China? --An empirical study using firm-level data

Bin Ni
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Bin Ni: PhD Candidate, Graduate School of Economics, Osaka University

No 13E004, OSIPP Discussion Paper from Osaka School of International Public Policy, Osaka University

Abstract: Using firm-level data from an Enterprise Survey of World Bank, this paper is designed to test how policy variables can affect inward foreign direct investment ("FDI") in China. After excluding the problems of sample selection and endogeneity, the result shows that investment promotion agencies (IPAs) and investment incentive zones (IIZs) have significant positive effect on absorbing FDI in China. Other factors such as sales volume and R&D also have significant impact. I also found that both IPAs and IIZs play a more important role in inviting other foreign companies to come to China than they do to Hong Kong, Macau, and Taiwan ("HMT") enterprises. The last finding is that if the city has IPA only, its promotion effect actually outweighs the city with IPA or IIZ combined; on the other hand, if the city has IPA or IIZ, then its positive effect on absorbing FDI will be larger than the city with IIZ solely.

Keywords: Investment promotion agency; firm-level data; sample selection; China (search for similar items in EconPapers)
JEL-codes: F21 F23 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-04
New Economics Papers: this item is included in nep-cse, nep-dev, nep-int and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:osp:wpaper:13e004

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