Determinants of foreign direct investment across China

Qian Sun, Hin Sang Tong, Qiao Yu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

248 Citations (Scopus)


We analyze the spatial and temporal variation in foreign direct investment (FDI) among China's 30 provinces from 1986 to 1998. Motivated by Naughton (Brooklings Pap Econo Activ 2 (1996) 273), we distinguish our study from similar studies by examining changes in importance of FDI determinants through time. We do find supporting evidence. This is due to the shift in the nature of FDI in China. We also find that the cumulative FDI relative to cumulative domestic investment has a negative impact on the new FDI. Provincial officials have to improve the investment environment. Otherwise, multinational corporations may choose to invest in provinces with fewer FDI competitors. Our analysis is robust across different specifications. However, it explains the FDI distribution in the coastal provinces better than it does for Central and Western provinces.
Original languageEnglish
Pages (from-to)79-113
Number of pages35
JournalJournal of International Money and Finance
Issue number1
Publication statusPublished - 1 Feb 2002


  • Agglomeration
  • China
  • Foreign direct investment
  • Foreign portfolio investment
  • Location theory

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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