The Economy of China
Show Less

The Economy of China

Linda Yueh

The emergence of China since 1979 has been a hallmark in the global economy, not only in the past but also in this century. This comprehensive book provides an analytical view of the remarkable economic development of the most exciting economy in the world.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 10: International Trade, Foreign Investment and the Global Economy

Linda Yueh


* EXTERNAL SECTOR POLICY Institutional change is nowhere more apparent than in China’s external policy, where policies since 1979 have transformed its exports and investment sectors. For developing countries such as China, one of the key driving forces in economic development operates not only through domestic expenditure but also by attracting foreign direct investment (FDI). For poor countries, in particular, the availability of foreign funds and technologies is crucial. These economies tend to have few domestic resources, either public or private, to invest in developing crucial physical and other technical infrastructure to underpin economic growth. The use of FDI to further economic development is well understood (see, for example, Stern 2002). For instance, the movement of capital from more to less developed countries, where returns are greater, is a key component of the ‘catching up’ process in the growth literature. The track record of developing countries in attracting foreign long-term capital rather than short-term capital is mixed. Many developing countries have attracted short-term capital flows, which are useful for improving the liquidity of their usually ‘thin’ financial markets, but they have also often brought about destabilising financial crises, seen in the second half the 1990s, in particular in the Asian financial crisis. In contrast, longterm capital or foreign investment in manufacturing capacity, research and development (R&D) facilities, and infrastructure is more attractive insofar as this type of investment is geared toward building and developing national capacity. This type of capital is also unlikely to be fickle or as subject to...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.