China and Central and Eastern European Countries: Regional Networks, Global Supply Chain, or International Competitors?

45 Pages Posted: 20 Apr 2016

See all articles by K. C. Fung

K. C. Fung

University of California, Santa Cruz - Department of Economics

Iikka Korhonen

Bank of Finland - Institute for Economies in Transition (BOFIT)

Rick Ke Li

University of California, Santa Cruz

Francis Ng

World Bank - Development Research Group (DECRG)

Date Written: August 1, 2008

Abstract

China has emerged as one of the top recipients of foreign direct investment in the world. Meanwhile, the successful transition experience of many Central and Eastern European countries has also allowed them to attract an increasing share of global foreign direct investment. In this paper, the authors use a panel data set to investigate whether foreign direct investment flows to these two regions are complements, substitutes, or independent of each other. Taking into account the role of host country characteristics - such as market size, degree of trade liberalization, and human capital - the authors find no evidence that foreign direct investment flows to one region are at the expense of those to the other. Instead, the results suggest that foreign direct investment flows are driven by distinct regional production networks (and thus are largely independent of each other) and the development of global supply chains (indicating that foreign direct investment flows are complementary).

Keywords: Debt Markets, Foreign Direct Investment, Emerging Markets, Economic Theory & Research, Investment and Investment Climate

Suggested Citation

Fung, K. C. and Korhonen, Iikka and Li, Rick Ke and Ng, Francis, China and Central and Eastern European Countries: Regional Networks, Global Supply Chain, or International Competitors? (August 1, 2008). World Bank Policy Research Working Paper No. 4689, Available at SSRN: https://ssrn.com/abstract=1233065

K. C. Fung (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

Santa Cruz, CA 95064
United States
831-459-3273 (Phone)
831-459-5077 (Fax)

HOME PAGE: http://econ.ucsc.edu/Faculty/facFung.shtml

Iikka Korhonen

Bank of Finland - Institute for Economies in Transition (BOFIT) ( email )

P.O.Box 160
Helsinki 00101
Finland

Rick Ke Li

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064

Francis Ng

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-8088 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/fng

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