Foreign Direct Investment in China
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Foreign Direct Investment in China

Location Determinants, Investor Differences and Economic Impacts

Chunlai Chen

Foreign Direct Investment in China is one of the most comprehensive studies of FDI in China and provides a remarkable background of information on the evolution of China’s FDI policies over the last 30 years.
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Chapter 6: Composition and Investment Intensity of Source Countries in China

Chunlai Chen


INTRODUCTION In the preceding chapters our studies of FDI in China have mainly focused on the analysis of location determinants of host countries and of host provinces of China. However, what is the composition of the source countries of FDI in China? Are there any differences in investment relations with China among source countries and what factors explain these differences? This chapter will discuss and answer these questions. From the host country’s point of view, a diversity of the sources of FDI can provide more opportunities for the host country to obtain and to absorb diversified information, technology, management skills and access to international markets, thus enhancing the gains to the host country’s enterprises and economy. However, as we will see in the following section, one of the most prominent features of FDI in China is the overwhelming dominance of developing countries and economies. Comparing the two groups of developing and developed countries and economies, at the year end of 2008, investments from developing countries and economies accounted for 75.38 per cent of China’s total inward FDI stock, while investments from developed countries accounted for only 24.62 per cent of the total.1 Why has China been so successful in attracting FDI inflows from developing countries and economies, especially from the Asian NIEs, but has been not very impressive in attracting FDI inflows from developed countries, especially from the Western European countries, even though they are the major investors for world FDI? In other words, what factors explain the investment relations...

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