Distribution of FDI across China – common policies but differing impacts by region

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”.

Citation

Foster, M.J. (2011), "Distribution of FDI across China – common policies but differing impacts by region", Journal of Chinese Economic and Foreign Trade Studies, Vol. 4 No. 2, pp. 125-138. https://doi.org/10.1108/17544401111143463