EU - China and the Non-Transparent Race for Inward FDI

Journal of Asian Economics, Vol. 19, No. 4

IFN Working Paper Series No. 745

41 Pages Posted: 17 Apr 2008 Last revised: 27 Oct 2016

See all articles by Lars Oxelheim

Lars Oxelheim

Research Institute of Industrial Economics (IFN); University of Agder; Knut Wicksell Center for Financial Studies, Lund University

Pervez Ghauri

King's College, London; University of Birmingham

Abstract

In this paper it is argued that the restructuring following the stiffer competition stemming from increased global integration will trigger a race between countries to attract inward foreign direct investment (FDI). It is further argued that this race consists of last minute efforts and tailor-made packages designed by governments and their agencies to temporarily improve their country's otherwise inferior profile. This race is non-transparent and the factors used to compete for inward FDI (the 'elements' of the race) deviate from those of long-term efforts to develop a favourable investment climate and improve productivity, as well as medium-term efforts, such as lowering corporate taxes. The paper elaborates on the research problem of properly understanding the drivers of inward FDI in the absence of data on the elements of the non-transparent race. It also addresses the economic policy problem following from this race with a scenario where a large share of global FDI ends up in China, putting the cohesion of the EU at stake and triggering a regional race within China.

Keywords: Inward FDI, China, European Union, investment-diverting policies

JEL Classification: E61, F15, F21, F23, F36, F42, G18, G34

Suggested Citation

Oxelheim, Lars and Ghauri, Pervez, EU - China and the Non-Transparent Race for Inward FDI. Journal of Asian Economics, Vol. 19, No. 4, IFN Working Paper Series No. 745, Available at SSRN: https://ssrn.com/abstract=1121482

Lars Oxelheim (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
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Sweden
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University of Agder ( email )

Serviceboks 422
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Norway

Knut Wicksell Center for Financial Studies, Lund University ( email )

P.O.Box 7080
S-220 07 Lund
Sweden
+46462228744 (Phone)

Pervez Ghauri

King's College, London ( email )

Strand
London, England WC2R 2LS
United Kingdom

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

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