China's success in attracting the inflow of foreign direct investment (FDI) has been well documented. Less known is the initial success of China's “going out” strategy, which encourages domestic enterprises to participate in international capital market and to directly invest overseas. This article assesses the aggregate dynamics of China's outward FDI in a comparative prism. It traces the strategic shift of Chinese overseas investment in both arenas of government policy and corporate entrepreneurship. An emphasis is on the particularistic policies of the government and active responses of enterprises to the challenges and opportunities offered by globalization and the deepening reform. The article also discusses the strategic implications of emerging Chinese multinationals for their Western counterpart.

ABSTRACT. This paper advocates a spatial dynamic model that introduces technology diffusion, factor mobility, and structural change into the cross-region growth regression. The spatial setting is derived from theory rather than spatial statistical tests. An application of this model to the study of cross-province growth in China over the period 1980-2005 indicates that incomes are spatially correlated, which highlights the significance of technology diffusion and factor mobility. Furthermore, the integration of neoclassical growth empirics and the structural change perspective of development economics provide a much improved account of interprovincial variations in income levels and economic growth.

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This study develops a spatial dynamic model to assess the total-factor-productivity (TFP) effects of externalities generated by foreign direct investment (FDI). The model is capable of disentangling TFP effects from capital accumulation effects and introducing spatial interdependence based on theoretical derivation rather than spatial statistical tests. An application of this model to a panel dataset of China at the provincial level over 1980-2005 shows significantly positive impact of FDI externalities on TFP within and across regions. This finding is robust to a range of empirical specifications of our theoretical model, to different estimators, and to alternative proxies of FDI intensity variable.