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Assessing the Role of Foreign Direct Investment in China’s Economic Development: Macro Indicators and Insights from Sectoral-Regional Analyses

Lo, Dic (2004) Assessing the Role of Foreign Direct Investment in China’s Economic Development: Macro Indicators and Insights from Sectoral-Regional Analyses. London, UK: School of Oriental and African Studies.

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Abstract

The objective of this paper is to assess the role of FDI in China’s economic development with reference to the broader literature on FDI and late development. Three main findings come out from the analyses in the paper. First, it is found that FDI tends to promote the improvement in allocative efficiency, while having a negative impact on productive efficiency. Second, insofar as FDI does promote overall productivity growth, this tends to be a matter of cumulative causation rather than one of single-direction causation. Third, in the context of a comparative analysis of two distinctive regional models, it is found that the economic impact of FDI tends to be more favourable in the inward-looking, capital-deepening pattern of development (the ‘Shanghai model’) than that in the export-oriented, labour-intensive pattern (the ‘Guangdong model’). Further analyses, however, suggest that the ‘Shanghai model’ has its intrinsic problems of sustainability. The scope for applying it to China as a whole is thus judged to be limited.

Item Type: Working Papers / Reports (Working Paper)
SOAS Departments & Centres: Faculty of Law and Social Sciences > Department of Economics
DOI (Digital Object Identifier): No. 135
Depositing User: Beth Clark
Date Deposited: 16 Mar 2006
URI: http://eprints.soas.ac.uk/id/eprint/109

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