Assessing the Role of Inward Foreign Direct Investment in Chinese Economic Development, 1990-2007: Towards a Synthesis of Alternative Views

Lo, Dic; Hong, Fuhai; Li, Guicai

Abstract

In the context of globalization, China has been widely regarded as the most successful country in the world in utilizing inward foreign direct investment (FDI) for economic development. The mainstream of the literature has produced a wide range of studies that are largely within the theoretical framework of neoclassical economics, and they tend to conclude that FDI has contributed significantly to Chinese economic development – through capital formation, export expansion, technology transfer, and the transformation of the economic structures and institutions. The objective of this paper is to assess the role of FDI in Chinese economic development with reference to the broader theoretical literature on FDI and late development, which encompasses structuralism and radical political economy along with neoclassical economics. From the perspectives of the broader literature, the analyses of the paper find that FDI in China has indeed promoted economic development in one respect (improving allocative efficiency), but has also had unfavourable effect in another respect (worsening productive efficiency), resulting in an overall impact that tends to be on the negative side. The mainstream story of China is thus judged to be partial, and the lessons to be drawn from the experience are arguably far more complex than have been hitherto perceived.

Citation

Lo, D., Hong, F., & Li, G. (2016). Assessing the Role of Inward Foreign Direct Investment in Chinese Economic Development, 1990-2007: Towards a Synthesis of Alternative Views. Structural Change and Economic Dynamics, 37(June), 107-120. https://doi.org/10.1016/j.strueco.2016.01.004

• Journal Article Type: Article
• Acceptance Date: Jan 23, 2016
• Online Publication Date: Feb 20, 2016
• Publication Date: Jun 1, 2016
• Deposit Date: Mar 3, 2016
• Publicly Available Date: Sep 22, 2016
• Journal: Structural Change and Economic Dynamics
• Print ISSN: 0954-349X
• Electronic ISSN: 1873-6017
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 37
• Issue: June
• Pages: 107-120
• DOI: https://doi.org/10.1016/j.strueco.2016.01.004
• Keywords: China, FDI, economic development
• Additional Information: Additional Information : Published online 20th February 2016.