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; Lund University

Pervez Ghauri

King's College, London; University of Birmingham


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:

Lars Oxelheim (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
SE-10215 Stockholm
+46 8 665 4527 (Phone)
+46 8 665 4599 (Fax)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604

Lund University ( email )

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

Pervez Ghauri

King's College, London ( email )

London, England WC2R 2LS
United Kingdom

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics