Foreign Direct Investment Flows To and From China

The study traces the growth of direct foreign investment (DFI) inflows in China, and its distribution by sector, receiving regions and source countries. It also looks into the trends and patterns of Chinese outward direct investments. Direct investment flows into China are shown to be significantly affected by China\u27s GDP growth rate, wage rate and exchange rate as well as the world\u27s GDP growth rate. Policy factors play a catalytic role. China\u27s overseas direct investment, likewise, appear to be influenced by home country (e.g.: Chinese government policies, Chinese competitive advantage) and host country (e.g., market considerations, cost and price factors, and receiving countries\u27 policies) variables. The study has also shown that the massive flows of inward DFIs have significantly contributed to China\u27s capital formation and export performance. Furthermore, the improved shares of China as well as the ASEAN-4 countries in the global supply of DFIs do not indicate a crowdingout effect. Two-way DFI flows between China and ASEAN countries, particularly Thailand and Malaysia, have become increasingly important since the early 1990s