Assessing the role of inward foreign direct investment in Chinese economic development, 1990–2007: Towards a synthesis of alternative views

Dic Lo, Fuhai Hong and Guicai Li

Structural Change and Economic Dynamics, 2016, vol. 37, issue C, 107-120

Abstract: In the context of globalization, China has been widely regarded as the most successful country in the world in utilizing inward foreign direct investment (FDI) for economic development. The mainstream of the literature has produced a wide range of studies that are largely within the theoretical framework of neoclassical economics, and they tend to conclude that FDI has contributed significantly to Chinese economic development—through capital formation, export expansion, technology transfer, and the transformation of the economic structures and institutions. The objective of this paper is to assess the role of FDI in Chinese economic development with reference to the broader theoretical literature on FDI and late development, which encompasses structuralism and radical political economy along with neoclassical economics. From the perspectives of the broader literature, the analyses of the paper find that FDI in China has indeed promoted economic development in one respect (improving allocative efficiency), but has also had unfavourable effect in another respect (worsening productive efficiency), resulting in an overall impact that tends to be on the negative side. The mainstream story of China is thus judged to be partial, and the lessons to be drawn from the experience are arguably far more complex than have been hitherto perceived.

Keywords: China; FDI; Economic development (search for similar items in EconPapers)
JEL-codes: F21 N65 O19 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:37:y:2016:i:c:p:107-120

DOI: 10.1016/j.strueco.2016.01.004

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