Keywords: foreign direct investment, FDI, China, regional economic growth, panel data, economic development, production function model, government policy, Chinese provinces
Sustaining growth in China's regions through FDI
This paper focuses on the impact of Foreign Direct Investment (FDI) on regional economic growth in China by using an extended production function model. Panel data are employed at the province level across 29 provinces over the period 1985–1999. Provinces are then split into three macro-regions. The empirical results indicate that FDI has contributed to economic growth in all three macro-regions of China. From a policy perspective, our results suggest that the Chinese government should provide preferential policies to attract and increase FDI inflows into the vast western region. This would help maintain the country's growth rate and further its economic development.