【IMIWorkingPaperNo.1509[EN]】FDIandEconomicDevelopment:EvidencefromChina'sRegionalGrowth

【Abstract】

By using China’s provincial data through 1978 to 2011, this paper examines the exact channels through which FDI affects China’sregional growth and inequality. We find that FDI can facilitate China’s economic growth through its impact on physical and human capital accumulation. On the other hand, FDI can have a negative impact on output growth by crowding out domestic investment, reducing local government revenue and increasing opportunity cost of technology innovations. Regarding FDI’s impact on regional inequality, we find that it can deliver both positive and negative effects. The imbalance of FDI inflows among regions can widen the interregional growth gap through its impact on physical capital accumulation and technology progress. While it narrows the growth gap between regions through its effects on level of higher education, industrial structure, government revenue, degree of openness and trade surplus.

【Keywords】

FDI, Emerging Economies, Economic Growth, China

【Author】

Liu Xiangbo: Research Fellow of IMI; Assistant Professor of Economics in the Hanqing Advanced Institute, Renmin University of China

Luo Yu: Research Fellow of IMI; Assistant Professor in the School of Finance, Renmin University of China

Qiu Zhigang: Assistant Professor of Finance in the Hanqing Advanced Institute at Renmin University of China

Zhang Ru: Risk Modeler at JPMorgan Chase