Are There Productivity Spillovers from Foreign Direct Investment in China?

Abstract

We review previous literature on productivity spillovers of foreign direct investment (FDI) in China and conduct our own analysis using a firm‐level data set from a World Bank survey. We find that the evidence of FDI spillovers on the productivity of Chinese domestic firms is mixed, with many positive results largely due to aggregation bias or failure to control for endogeneity of FDI. Attempting over 6000 specifications that take into account forward and backward linkages, we fail to find evidence of systematic positive productivity spillovers from FDI in China.