Does FDI in China Displace Foreign Jobs in Asia?

This paper studies the China effect from a novel perspective. We focus on the effect of FDI in China on foreign employment flows in the rest of Asia. The concentration of FDI in China may divert employment from similar surrounding countries. Offsetting this negative effect, MNE activities might spillover to neighboring countries along the foreign production chain. Therefore, the effect of global FDI champions is uncertain. Most studies on this issue focus on trade and FDI inflows. The China effect on other aspects of international production, like employment, remains largely unknown. The contributions of this paper are twofold. First, we enhance the estimation of the China effect with recent econometrics developments in international economics. Second, we study foreign employment, which has been overlooked by the specialized literature. We determine empirically this effect on a set 25 Asiatic countries during 2003–2009. Results suggest a mild job diversion in Asia