Developing inland China: The role of coastal foreign direct investment and exports

Abstract

The design of China's foreign direct investment (FDI) and export promotion policies has intrinsic elements not helpful with the original policy intent to generate spillovers to the wide Chinese economy. Applying panel estimation models to Chinese provincial‐level data for 1993–2008, we examine the impacts of China's coastal FDI and exports on its inland regions. We find that the coastal FDI has overall positive inter‐regional impacts, while the coastal exports do not. Cooperative joint ventures generate positive impacts, but little for wholly foreign‐funded enterprises and even negative for equity joint ventures. The inter‐regional impacts do not exhibit any significance and robustness across exporters' ownership status. We attribute these counter‐intuitive findings to the protectionist behaviours of state‐owned enterprises in equity joint ventures and the prevalence of processing exports.

A Spatial Analysis of Inward FDI and Rural-Urban Wage Inequality: Evidence from China

“…In contrast to Asiedu and Esfahani (2001) and Javorick and Saggi (2010) who show that WFE is with the highest level technology rather than the joint ventures (CJV and EJV), Girma et al (2015) find that foreign invested enterprises with minority (with more than 25% but less than 50% foreign capital) experience higher likelihood of R&D and conclude the joint ventures can positively contribute to the technology innovation. In line with this finding, Ouyang and Yao (2017) further argue that the joint ventures mentioned in Girma et al (2015) as the EJV employs political elites while the CJV is lower cost labor…”

“…The large cities with more job opportunities such as Beijing, Tianjin, Shanghai, Hangzhou, Guangzhou and Shenzhen are all on the coast. However, most previous research only focuses on rural-urban migration at the intra-provincial level and does not consider this labor mobility at the interprovincial level, except a few studies that recognize the importance of inland-coastal interplay (Kanbur and Zhang, 1999;Ouyang and Yao, 2017). Nonetheless, they do not account for the overall interplay between regions.…”

“…The regional disparities in economic development and inequality are caused by the uneven distribution of inward FDI (Madariaga and Poncet, 2007;Ouyang and Yao, 2017). The regions that have higher level of international trade, lower wages, more favorable environment for R&D, higher GDP growth rates, better infrastructure, higher returns on physical and human capitals, larger market size, better labor force and more beneficial policies have higher absorptive capacity for FDI (Wei et al, 1999;Cheng and Kwan, 2000;Sun et al, 2002;Cassidy and Andreosso, 2006;Salike, 2016).…”

“…Moreover, the Special Economic Zones (SEZ) program has played a significant role in attracting foreign capital and shaping the relationship between the FDI and the local economies, which reveals Year the fact that the coastal regions receive the largest portion of inward FDI, whereas the western regions receive the smallest share (Wang, 2013). This uneven distribution of inward FDI can lead to spatial spillovers, especially from the coastal regions to inland areas (Kanbur and Zhang, 1999;Ouyang and Yao, 2017). Our consideration not only falls within inland-coastal spillovers but also goes towards the overall picture of inter-regional interactions.…”

“…The loosening of restrictions on establishing wholly foreign-owned enterprises has led to changes in the structure of inward FDI (Girma et al, 2015). Ouyang and Yao (2017) further show that FDI in equity joint ventures (EJV) has a positive impact on economic growth, whereas the impact of FDI in cooperative joint venture (CJV) is negative. Therefore, we also study how the spatial effect of inward FDI may vary for FDI with different entry modes.…”