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Peter J. Buckley and Hinrich Voss

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Peter J. Buckley and Hinrich Voss

The rapid international expansion of Chinese businesses has evoked mixed perceptions in host countries and among policymakers. This literature review critically analyses rigorous studies on the motivation, background, strategy, and impact of Chinese outward foreign direct investment and the emergence of Chinese multinational enterprises (MNEs). It is thus informative for the next wave of academic research on Chinese and emerging market MNEs in international business, political economy, economic geography and political sciences. Written by two experts in the field, this valuable study provides an important backdrop for academics who intend to understand emerging market MNEs in order to advise policymakers.
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Peter J. Buckley and Hinrich Voss

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Peter J. Buckley and Hinrich Voss

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Social Trust and Economic Development

The Case of South Korea

O. Yul Kwon

In just one generation, South Korea has transformed from a recipient of foreign aid to a member of the G20. In this informative book, South Korea is used as a case by which to explore and illustrate specific issues arising from the complex relationships between the nation’s economic development and society.
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Conclusion and policy implications

A Critical Assessment

Chunlai Chen

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Chunlai Chen

Foreign Direct Investment and the Chinese Economy provides a comprehensive overview of the impact of foreign direct investment, with extensive empirical evidence, on the Chinese economy over the last three and a half decades.
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Chunlai Chen

Since the economic reforms implemented in late 1978, China has achieved remarkable results in increasing per capita income and improving the living standards of the Chinese people, which have been attributed to the rapid economic growth. However, with this fast economic growth, income inequality, especially urban–rural income inequality, in China has actually worsened. While FDI has contributed to China’s economic growth, has FDI also contributed to the increase of income inequality in China? Chapter 4 investigates empirically whether FDI has improved or worsened urban–rural income inequality in China. By using a provincial-level panel dataset containing China’s 30 provinces over the period 1987–2014 and employing the fixed-effects and instrumental variable regression techniques, the study finds that the effect of FDI on urban–rural income inequality is non-linear. At first, FDI increases urban–rural income inequality. And after reaching a critical level, FDI starts to reduce urban–rural income inequality through employment creation, knowledge spillovers and contribution to economic growth. Overall FDI will contribute to reducing urban–rural income inequality in China as FDI inflows continue to rise. However, the study also finds that FDI has indirectly contributed to increasing urban–rural income inequality in China through its significant role in international trade. In addition, the study finds that there exists a Kuznets inverted-U curve relationship between urban–rural income inequality and economic development, suggesting that urban–rural income inequality will gradually decline in China as China’s economy continues to grow and per capita income keeps rising.

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Chunlai Chen

Foreign direct investment in China has created a large amount of employment opportunities for rural surplus labor and the heavy concentration of FDI in China’s coastal region has attracted hundreds of millions of rural migrants from the inland region to work in the coastal region. This type of rural–urban and cross-region population migration associated with FDI may have impacts on China’s urbanization development, especially on the urbanization development in the inland region. Chapter 6 uses a city-level panel dataset covering China’s 262 cities for the period 2004–13 and employs the dynamic panel system Generalized Method of Moments (GMM) model with the instrumental variables regression techniques to investigate empirically both the impacts of FDI on urbanization development in China and the interregional impacts of FDI, especially FDI in the coastal region, on the urbanization development of the inland region. The study finds that FDI has played a significantly positive role in the urbanization development of a host city. However, the study also finds that FDI in other inland cities and FDI in coastal cities have different interregional impacts on the urbanization development of an inland city. FDI in other inland cities could contribute to increasing the urbanization development of an inland city as FDI in other inland cities can create positive interregional knowledge spillovers due to its low level of engagement in processing trade and extensive industrial linkages with firms in inland cities. However, FDI in coastal cities impedes the urbanization development of an inland city because FDI in coastal cities has negative interregional spillover effects resulting from its high level of engagement in processing trade and lack of industrial linkages with firms in inland cities.

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Chunlai Chen

Foreign direct investment in China is heavily concentrated in the coastal region. Do inland provinces benefit from FDI in the coastal region? Chapter 3 investigates empirically the interregional impacts of FDI in the coastal region on the economic growth of inland provinces. By using a provincial-level panel dataset containing China’s 19 inland provinces over the period 1987–2014 and employing the fixed-effects and instrumental variable regression techniques, the study finds that, on average, FDI in the coastal region has had a negative impact on economic growth in inland provinces. By further dividing FDI in the coastal region into FDI in the coastal provinces engaging in medium-level processing trade and FDI in the coastal provinces engaging in high-level processing trade, the study finds that FDI in the coastal provinces engaged in medium-level processing trade has no significant interregional impact on the economic growth of inland provinces. However, FDI in the coastal provinces engaged in high-level processing trade still has a negative interregional impact on the economic growth of inland provinces. The explanation for this could be that processing trade has no industrial linkages with and cannot generate backward and forward knowledge spillovers to firms in inland provinces. Therefore, this study provides further evidence of the importance of industrial linkages in enhancing knowledge spillovers from FDI to the local economy.