What Drives Export Competitiveness? The Role of FDI in Chinese Manufacturing

14 Pages Posted: 14 May 2015

See all articles by Kevin H. Zhang

Kevin H. Zhang

Illinois State University - Department of Economics; University of Colorado

Date Written: July 2015


Export competitiveness (XC) is a country’s ability to compete globally through expanding export capacity and upgrading export sophistication. How does foreign direct investment (FDI) affect XC? This article studies the issue based on evidence from Chinese manufacturing. Using data on 21 manufacturing sectors for 31 regions over 2005–2011, we construct the XC index and its three composite indicators, following the Organization for Economic Co-operation and Development (OECD) and United Nations Industrial Development Organization (UNIDO). Four findings emerge from the estimates: (a) FDI is a key driver of China’s export success; (b) China’s absorptive capacity reinforces the effects of FDI through domestic learning efforts; (c) FDI seems to contribute more to export capacity than export upgrading, especially in labor intensive/low-tech products; and (d) high-tech FDI from the western world seems to be more conducive to export upgrading than low-tech FDI from developing economies.

Suggested Citation

Zhang, Kevin H., What Drives Export Competitiveness? The Role of FDI in Chinese Manufacturing (July 2015). Contemporary Economic Policy, Vol. 33, Issue 3, pp. 499-512, 2015, Available at SSRN: https://ssrn.com/abstract=2605215 or http://dx.doi.org/10.1111/coep.12084

Kevin H. Zhang (Contact Author)

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States
309-438-8928 (Phone)
309-438-5228 (Fax)

University of Colorado

1070 Edinboro Drive
Boulder, CO 80309
United States

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