Academic journal article Research-Technology Management

Is China's FDI Coming at the Expense of Other Countries?

Academic journal article Research-Technology Management

Is China's FDI Coming at the Expense of Other Countries?

Article excerpt

Is China's FDI Coming at the Expense of Other Countries? Barry Eichengreen and Hui Tong; National Bureau of Economic Research Working Paper 11335, Oct. 2005.

This study finds that the growing amount of foreign direct investment (FDI) in China encourages greater investment in other countries. The authors find that this complementary relationship is particularly evident in Asia, where China's economic explosion seems to be driving investors to support a regional supply chain for feeding China's burgeoning enterprises.

Eichengreen and Tong show that as direct investment--led by Japan--in China has gone up, it also has increased in places like Singapore, a major supplier of goods used in Chinese manufacturing, and Indonesia, which provides raw materials and energy to China. For example, Eichengreen and Tong observe that in order "to reap the full benefits of building assembly plants in China, firms may also need to invest in component production"--such as electronic components used in Chinese manufacturing plants--"in Singapore or Malaysia. …

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