Yingqi Wei

Causal links between foreign direct investment and trade in China

Abstract This paper examines the causal relationship between foreign direct investment (FDI) and trade (exports and imports) in China. The empirical study is based on a panel of bilateral data for China and 19 home countries/regions over the period 1984–1998. Econometric techniques for panel data are applied to test unit roots and causality. The results indicate a virtuous procedure of development for China: the growth of Chinas imports causes the growth in inward FDI from a home country/region, which, in turn, causes the growth of exports from China to the home country/region. The growth of exports causes the growth of imports. The results have important policy implications.

Country characteristics and foreign direct investment in China: A panel data analysis

Country Characteristics and Foreign Direct Investment in China: A Panel Data Analysis. — In this paper an error-components model is developed to analyze the economic, political and cultural determinants of both pledged and realized FDI in China which has recently become the second largest host country for FDI. The panel data cover the period 1983–1994 (1984–1994) and 22 (17) home countries/regions in the case of pledged (realized) FDI. The results indicate that bilateral trade, cultural differences, and relative real changes in market size, wage rates, and exchange rates are important determinants of pledged FDI, and that bilateral trade, relative changes in wage rates and exchange rates affect realized FDI.ZusammenfassungNationale Charakteristika und ausländische Direktinvestitionen in China. Eine Analyse von Panel-Daten. — Die Verfasser entwickeln ein Fehlerkorrekturmodell, um die wirtschaftlichen, politischen und kulturellen Bestimmungsgründe sowohl für zugesagte als auch für realisierte ausländische Direktinvestitionen (FDI) in China, welches neuerdings das zweitgrößte Anlageland für solche Investitionen geworden ist, zu untersuchen. Die Panel-Daten umfassen den Zeitraum 1983–1994 (1984–1994) und 22 (17) Herkunftsländer/-regionen bei den zugesagten (realisierten) FDI. Die Ergebnisse deuten darauf hin, daß bilateraler Handel, kulturelle Unterschiede und relative reale Veränderungen von Marktgröße, Lohnsätzen und Wechselkursen wichtige Determinanten für zugesagte FDI sind, während bilateraler Handel und relative Veränderungen von Lohnsätzen und Wechselkursen die realisierten FDI bestimmen.

The impact of foreign direct investment on labour productivity in the Chinese electronics industry

Foreign direct investment (FDI) may have a positive impact on labour productivity in recipient industries through direct introduction of capital, technology and management skills and indirectly through spillover effects on domestic firms. This study uses a model intended to examine the overall effects of inward FDI in the Chinese electronics industry. Official data are used for 41 sub-sectors of the industry in 1996 and 1997 having differing levels of FDI. Labour productivity is modelled as dependent on the degree of foreign presence in the industry and other variables, namely capital intensity, human capital and firm size for scale factors. The econometric results suggest that foreign presence in the industry is associated with higher labour productivity.

Determinants of Bilateral Trade Flows in OECD Countries: Evidence from Gravity Panel Data Models

This paper aims to identify the main causes of bilateral trade flows in OECD countries. The specific features of the study include the explicit introduction of R&D and FDI as the two important explanatory variables, conduct of unit root tests in the panel data framework and careful consideration of endogeneity. The main findings are that the levels and similarities of market size, domestic R&D stock and inward FDI stock are positively related to bilateral trade, while the distance, measured by both geographical distance and relative factor endowment, between trade partner countries has a negative impact. These findings lend support to new trade, FDI and new growth theories.

Understanding China's international economic integration

China has been changing fast socially, economically and politically since opening up to the world economy in 1978. With the liberalisation of dysfunctional systems of central planning, state ownership, government regulations and trade and foreign investment rules and reforms in agriculture, industry, and the financial, banking and service sectors, China has performed exceptionally well by most standards. China has maintained its position amongst the fast growing economies in the world during the past three decades. On a purchasing power parity (PPP) basis, it is the world’s second largest economy after the United States (Zhang and Liu 2009). Equally significant is the increased importance of China’s trade and FDI, China has become number one in the developing world for its exports and inward investment (Zhang and Liu 2009). China is a leading producer/exporter of many industrial products, including textiles, clothing, steel, coal, electrical and electronic goods, and pharmaceuticals. China also seems to have so far successfully weathered significant economic and political difficulties, including various episodes of overheating at different times, the Asian Financial Crisis of the late 1990s and the latest economic crisis. Despite the fact that its economy virtually stalled in late 2008, China bounced back with some impressive records. Recently published figures show China’s GDP grew by 7.9% in 2009 to the second quarter, fixed investment grew by 35%, car sales by 48% and home purchases by more than 80% (The Economist, 18 July 2009). What has contributed to this development? A large volume of books, articles and reports has been produced to shed light on this question. A general consensus is that international economic integration into the world economy through openness to trade and FDI is a key factor in bringing China its success. In a country where exposure to the world economy was associated with the shadow of humiliation, and self-reliance was considered a virtue, openness, or ‘Kai Fang’ as the Chinese say, was initially embarked upon with caution (Shenkar 2005). There wasn’t a ‘well-designed blueprint’ and ‘muddling through experiments’ seemed to be the Chinese

Export market location decision and performance

Purpose – Drawing on the resource-based view and network theory, the purpose of this paper is to investigate the role of external networks (ENs) and absorptive capacity (AC) in export market location decision of emerging economy firms (EEFs) and the performance implication of this decision. Design/methodology/approach – This study employs structural equation modeling to test three hypotheses: first, ENs influence an EEF managers propensity to enter culturally/psychically distant markets for exports. Distant markets are more likely to be chosen by managers of firms with abundant ENs. Second, AC moderates this network-market location relationship. Third, superior performance results from the fit between managers’ propensity to enter a market and firms’ levels of ENs and AC. Findings – An analysis of 196 Chinese exporting firms supports the hypotheses. Research limitations/implications – Though the theoretical discussion is general, the empirical context is specific to Chinese export manufacturers. Replicat...

Textiles and clothing exports from india and china: a comparative analysis

This paper compares the export performance of the textiles and clothing industries in India and China using the revealed comparative advantage and the Kreinin-Finger similarity indices. The results indicate that China has much higher shares in world exports of both textiles and clothing, while India has a comparative advantage in womens clothing of various sorts and mens shirts. With the abolition of the MFA, China is likely to gain at the expense of India in most items of exports of clothing, even in categories where India has a higher market share than China. India would have to improve her competitive strengths in export markets vis-à-vis China, especially so in high value design oriented products in the EU and the US markets.

Productivity spillovers from foreign direct investment in Chinese industries

This paper investigates productivity spillover effects of FDI and relates it to the capital- or labour-intensive nature of the industry. Using a panel data set of 35 industries in China, it shows that the presence and magnitude of FDI spillover effects vary by different channels and the nature of the industry. On average, FDI has no horizontal spillover effects but has positive backward linkage effects. However, there are substantial differences in FDI spillover effects via demonstration, competition and labour mobility between capital- and labour-intensive industries. The findings have important policy implications.

Local sourcing of multinational enterprises in China

Purpose – Local sourcing from indigenous firms by multinational enterprises (MNEs) is an important channel through which the former may benefit from the positive externalities generated by the latter. The purpose of this study is to analyze the extent and determinants of local sourcing of MNEs.Design/methodology/approach – Employing a survey dataset covering 493 multinational subsidiaries in China during 1999‐2005, this paper applies the two‐limit Tobit model.Findings – It is found that an MNEs local sourcing decision is influenced by its strategies, characteristics such as size and learning ability and country‐of‐origin. More specifically, export‐orientation strategy, joint venture strategy and networking with local suppliers positively affect local sourcing. Small and autonomous subsidiaries tend to source more locally. Age has a non‐linear effect. The importance of these determinants varies with regions.Research limitations/implications – Aiming at capacity building and competitiveness of indigenous f...

The Impact of Regulatory Intervention in the UK Store Card Industry

Abstract The paper examines the impact of regulatory intervention on store card interest rates, for a panel of UK store cards. Panel data estimation methods are used in conjunction with intervention analysis so that the impact of the investigations on store card interest rates can be examined. Results suggest that there is a significant negative impact on store card interest rates. The impact of macroeconomic factors and credit card interest rates on store card interest rates are also taken into account, results indicating that store cards and credit cards should be considered as competing sources of credit.