Impact of China's Outward Foreign Direct Investment on its Regional Economic Growth

21 Pages Posted: 14 May 2018

See all articles by Chunlai Chen

Chunlai Chen

Australian National University

Date Written: May–June 2018

Abstract

This paper investigates the impact of China's outward foreign direct investment (OFDI) on its economic growth. By using a provincial‐level panel dataset and applying fixed‐effects and instrumental variable regression techniques, the study finds that both OFDI from provincial firms and OFDI from state‐owned enterprises have a positive impact on China's provincial economic growth. The positive impact of OFDI on provincial economic growth may be the result of reverse knowledge spillovers from OFDI to the home provincial economy through demonstration and imitation, labor movement, and backward and forward industrial linkages, thus increasing the productivity and the efficiency of home firms and promoting the growth of the home economy.

Keywords: economic growth, fixed effects and instrumental variables, knowledge spillovers, outward foreign direct investment

JEL Classification: F21, F62, O40, R11

Suggested Citation

Chen, Chunlai, Impact of China's Outward Foreign Direct Investment on its Regional Economic Growth (May–June 2018). China & World Economy, Vol. 26, Issue 3, pp. 1-21, 2018, Available at SSRN: https://ssrn.com/abstract=3177225 or http://dx.doi.org/10.1111/cwe.12240

Chunlai Chen (Contact Author)

Australian National University ( email )

Asia Pacific School of Economics & Mgmt. (APSEM)
ACT 0200 Canberra
Australia
61 2 6125 6565 (Phone)
61 2 6125 5570 (Fax)

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