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The rational role of government in the process of attracting foreign direct investment in China

Frontiers of Business Research in China volume 1, pages 319–332 (2007)Cite this article

Abstract

Based on consumer and manufacturer behaviors, this research describes local governments’ unique role in the process of “attracting foreign direct investment (FDI)”. Drawing from a sample of 28 provinces plus four cities throughout China from 1998 to 2004, we construct an econometric model in this paper to analyze the common factors that influenced the result of “attracting FDI”. The main finding of this paper is that in the process of “attracting FDI”, local governments play a decisive role, which puts consumer surplus, producer surplus and the other social welfare into a basket to construct its plan for “attracting FDI”. The common factors which influence the result of “attracting FDI” are local costs, the number of foreign-invested company, the market share of local companies, and the market share of foreign-invested companies.

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Authors and Affiliations

  1. Research Department, China CITIC Securities Co., Ltd., Beijing, 100004, China

    Liu Ke

  2. Institute of Social and Public Policy, Beijing Normal University, Beijing, 100875, China

    Gao Mengtao

Authors
  1. Liu Ke
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  2. Gao Mengtao
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Correspondence to Liu Ke.

Additional information

Translate from Caimao Jingji 财贸经济 (Finance & Trade Economics), 2005, (12): 70–75

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Liu, K., Gao, M. The rational role of government in the process of attracting foreign direct investment in China. Front. Bus. Res. China 1, 319–332 (2007). https://doi.org/10.1007/s11782-007-0018-8

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  • DOI: https://doi.org/10.1007/s11782-007-0018-8

Keywords

  • promotion of FDI
  • role of local governments
  • micro-mechanisms