TY  - JOUR
AU  - Eichengreen,Barry
AU  - Tong,Hui
TI  - Is China's FDI Coming at the Expense of Other Countries?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11335
PY  - 2005
Y2  - May 2005
UR  - http://www.nber.org/papers/w11335
L1  - http://www.nber.org/papers/w11335.pdf
N1  - Author contact info:
Barry Eichengreen
Department of Economics
University of California, Berkeley
549 Evans Hall 3880
Berkeley, CA 94720-3880
Tel: 510/642-2772
Fax: 510/643-0926
E-Mail: eichengr@econ.Berkeley.edu

Hui Tong
Research Department
IMF Washington DC
700 19th Street N.W.
Washington, DC 20431
E-Mail: htong@imf.org
M2  - featured in NBER digest on 2005-10-01
AB  - 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.
ER  -