Export Requirements and Special Features of Inward Foreign Direct Investment in China

Xiaohui Liu and Yingqi Wei
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Xiaohui Liu: The University of Luton

No 130, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: The paper investigates the relationship between the policy of export requirements and special features of China's inward foreign direct investment (FDI), and examines how trade-related investment measures affect the investment decisions of multinational firms. A theoretical model is constructed that allows us to analyse how location advantages affect the equilibrium regime under which multinational firms and government policy toward FDI co-exist endogenously. The model also exam the welfare effects of export requirements policy by comparing with an alternative policy - production tax. The findings from this study accord well with the evidence regarding China's inward FDI. The main results indicate that the policy of export requirements is sub-optimal.

Date: 2002-08-29
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Persistent link: https://EconPapers.repec.org/RePEc:ecj:ac2002:130

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