How Does FDI Affect Economic Growth in China?

Posted: 15 Oct 2001

See all articles by Kevin H. Zhang

Kevin H. Zhang

Illinois State University - Department of Economics; University of Colorado


How does inward foreign direct investment (FDI) affect a transitional economy? This study attempts to analyze the role of FDI in China's income growth and market-oriented transition. We first identify possible channels through which FDI may have positive or negative effects on the Chinese economy. Using a reasonable growth model and cross-section and panel data in the period of 1984-98, we provide an empirical assessment, which suggests that FDI seems to help China's transition and promote income growth, and that this positive growth-effect seems to rise over time and to be stronger in the coastal than the inland regions.

Keywords: Foreign direct investment, economic growth, and transition

JEL Classification: F21, F23, O53

Suggested Citation

Zhang, Kevin H., How Does FDI Affect Economic Growth in China?. Available at SSRN:

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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