Location Determinants, Investor Differences and Economic Impacts
Chapter 4: The Impact of China on FDI Inflows into Other Developing Countries
4. The impact of China on FDI inflows into other developing countries INTRODUCTION Since the 1990s and especially after China’s accession to the WTO in 2001, China has become one of the most favoured destinations for FDI. In 2008, FDI inflows into China reached US$92.4 billion. In 2009, despite the global economic recession, which severely affected world FDI flows, China still attracted US$90 billion FDI inflows. In 2010, FDI inflows into China reached a historical high of US$105.74 billion. There are increasing concerns that China’s FDI success has been excessive, thereby crowding out FDI inflows into other developing countries. In Chapter 3, we revealed that based on China’s location variables, China received only its fair share of FDI inflows from the world, or at most marginally more than its potential, for the last three decades. However, many developing countries, especially several of China’s neighbouring Asian developing economies, have raised their concerns that the emergence of China has not only diverted FDI away from them but has also attracted their own domestic investors to leave their economies, resulting in a continuous loss of manufacturing industries and jobs, and further weakening their economies. A growing China can add to other countries’ FDI inflows by creating more opportunities for production networking and by raising the demand for raw materials and resources. At the same time, the extremely low Chinese labour costs may lure MNEs away from other developing countries when the MNEs consider alternative locations for low-cost export platforms. Theoretically,...
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