FDI Flows to Latin America, East and Southeast Asia, and China: Substitutes or Complements?

14 Pages Posted: 19 Jul 2010

See all articles by Busakorn Chantasasawat

Busakorn Chantasasawat

affiliation not provided to SSRN

K. C. Fung

University of California, Santa Cruz - Department of Economics

Hitomi Iizaka

Aoyama Gakuin University

Alan Siu

The University of Hong Kong - School of Economics and Finance

Abstract

Is China diverting foreign direct investment (FDI) from other developing countries? Theoretically, a growing China augments other countries' FDI by creating more production networking and raising demand for resources. However, low Chinese costs lure multinationals away from other production sites. Here we explore this issue empirically. We focus on East and Southeast Asia and Latin America for 1985–2002. We control for the standard determinants of inward FDI, then add China FDI to represent the “China Effect.” We found that China's FDI is positively related to FDI in Asia, while the China Effect is insignificant for Latin America. Also the China Effect is generally not the most important determinant of other countries' FDI. Market sizes and policies such as corporate tax rates and openness tend to be more important.

Suggested Citation

Chantasasawat, Busakorn and Fung, K. C. and Iizaka, Hitomi and Siu, Alan K. F., FDI Flows to Latin America, East and Southeast Asia, and China: Substitutes or Complements?. Review of Development Economics, Vol. 14, No. 3, pp. 533-546, August 2010, Available at SSRN: https://ssrn.com/abstract=1643586 or http://dx.doi.org/10.1111/j.1467-9361.2010.00569.x

Busakorn Chantasasawat (Contact Author)

affiliation not provided to SSRN ( email )

K. C. Fung

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

Hitomi Iizaka

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

Alan K. F. Siu

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
+852 2859 2192 (Phone)
+852 2548 1152 (Fax)

HOME PAGE: http://www.econ.hku.hk/~asiu

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