Kevin Honglin Zhang

Promoting exports: the role of inward FDI in China

Abstract Since the late 1970s, exports and inward foreign direct investment (FDI) in China have risen dramatically under the open-door policy. The critical role of FDI in Chinas exports may be indicated by the fact that exports by foreign affiliates in China in 1998 were US

How does foreign direct investment affect economic growth in China

81 billion, comprising 44% of Chinas total exports in that year. While there is considerable evidence on the FDI export linkage in China, systematically empirical analyses have been limited. This paper investigates the issue using panel data at the provincial level in the period of 1986–1997. The findings support the widely held belief that increased levels of FDI positively affect provincial manufacturing export performance.

FDI and Industrial Productivity in China: Evidence from Panel Data in 2001–06

How does inward foreign direct investment (FDI) affect a transitional economy? This study attempts to analyze the role of FDI in China’s income growth and market‐oriented transition. We first identify possible channels through which FDI may have positive or negative effects on the Chinese economy. Using a growth model and cross‐section and panel data for the period 1984‐98, we provide an empirical assessment, which suggests that FDI seems to help China’s transition and promote income growth, and that this positive growth effect seems to rise over time and to be stronger in the coastal than the inland regions. JEL classification: F21, F23, O53.

China's Industrial Competitiveness in the World

How does foreign direct investment (FDI) affect Chinas industrial productivity? While the topic is important, the relevant empirical studies in the literature have been limited. This paper attempts to close the gap by investigating the issue with panel data in the period 2001–06. Empirical models for both productivity level and growth are developed, in which two channels are identified through which FDI may affect industrial productivity directly and indirectly. The estimates suggest that FDI has positive direct and spillovers effect on Chinas industrial productivity level and growth, and the contribution of FDI to productivity is enhanced by its interaction with Chinas human capital. While labor-intensive industries benefit more from FDI direct effects, capital-intensive industries gain more from FDI spillover effects.

International Production Networks and Export Performance in Developing Countries: Evidence from China

This article studies Chinas industrial competitiveness using international perspectives and comparison. Adopting the index of competitive industrial performance developed by the United Nations Industrial Organization (UNIDO), we assess Chinas position in the world and analyze the dynamics of its industrial capabilities, focusing on five drivers of industrial capability: skills, technological efforts, inward foreign direct investment (FDI), royalty and technical payments abroad, and modern infrastructure. We find that Chinas big jump in industrial competitiveness is largely associated with its participating international production networks. The corresponding dangers with such connection, however, are low domestic value added and merely serving as an export platform. China can become a global industrial power only if it succeeds in upgrading industry and domestic innovation.

Foreign direct investment in China

Developing countries may expand their exports through participating in international production networks organized by multinational corporations. China appears to have been successful with this approach in the past two decades. Its exports rose from

How Much Does China's Exchange Rate Affect the U.S. Trade Deficit?

9.8 billion in 1978 (ranked as thirty-second in the world) to

Urbanization and Industrial Development in China

762 billion in 2005 (the third-largest in the world). In the same period, accumulated foreign direct investment (FDI) flows into China increased from zero to

Macro- and Micro-Drivers of Manufacturing Performance of China

602 billion, and exports by foreign-invested enterprises in 2005 comprised 57 percent of Chinas total exports. FDI promotes Chinas exports mainly through labor-intensive processes and component specialization within vertically integrated international industries. However, the challenge facing China is how to increase domestic value added and how to upgrade its industry in international production networks.

Capital Markets, Industrial Development, and the Role of China in the World Economy

China has emerged as the most dynamic FDI‐host country in the world, and the impact of FDI on the Chinese economy has burgeoned in ways that no one anticipated. This paper focuses on four issues: (a) the factors behind the FDI boom; (b) how China has succeeded in utilizing FDI so far; (c) Chinas FDI strategy; and (d) its future development. Chinas special advantages in attracting and using FDI come from three sources: the huge market with cheap labour, the large number of rich overseas Chinese as investors, and the effective FDI strategy and policy implemented by the central government. Whether or not China will be a winner in future depends on how it balances between technology transfers and domestic market protection.