Direct foreign investment and inter‐regional economic disparity in China

Abstract

Discusses the pattern of the regional distribution in the Chinese economy of Direct foreign investment (DFI) in the context of the open‐door policy and the regional difference in investment environments. Presents a regression analysis on the effects of DFI on the economic growth in the eastern and western regions, using pooled time‐series and cross‐section data for 16 provinces over a seven‐year period (1986‐92). Discusses other important factors influencing regional economic development including rural industry development, differential growth of fixed capital investment and exports, and domestic capital flow from the western region to the eastern region. A case study of the effect of DFI on the intra‐provincial economic inequality in Guangdong Province is presented and some conclusions and policy implications are drawn.

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