NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Is China's FDI Coming at the Expense of Other Countries?

Barry Eichengreen, Hui Tong

NBER Working Paper No. 11335
Issued in May 2005
NBER Program(s):   ITI

We analyze how China's emergence as a destination for foreign direct investment is affecting the ability of other countries to attract FDI. We do so using an approach that accounts for the endogeneity of China's FDI. The impact turns out to vary by region. China's rapid growth and attractions as a destination for FDI also encourages FDI flows to other Asian countries, as if producers in these economies belong to a common supply chain. There is also evidence of FDI diversion from OECD recipients. We interpret this in terms of FDI motivated by the desire to produce close to the market where the final sale takes place. For whatever reason -- limits on their ability to raise finance for investment in multiple markets or limits on their ability to control operations in diverse locations -- firms more inclined to invest in China for this reason are corresponding less inclined to invest in the OECD. A detailed analysis of Japanese foreign direct investment outflows disaggregated by sector further supports these conclusions.

download in pdf format
   (236 K)

email paper

A non-technical summary of this paper is available in the October 2005 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (236 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11335

Published: Eichengreen, Barry & Tong, Hui, 2007. "Is China's FDI coming at the expense of other countries?," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 153-172, June.

Users who downloaded this paper also downloaded these:
Whalley and Xin w12249 China's FDI and Non-FDI Economies and the Sustainability of Future High Chinese Growth
Branstetter and Foley w13470 Facts and Fallacies about U.S. FDI in China
Eichengreen, Rhee, and Tong w10768 The Impact of China on the Exports of Other Asian Countries
Eichengreen and Hatase w11625 Can a Rapidly-Growing Export-Oriented Economy Smoothly Exit an Exchange Rate Peg? Lessons for China from Japan's High-Growth Era
Fan, Morck, Xu, and Yeung w13435 Institutions and Foreign Investment: China versus the World
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us