1、中文 1637 字 1 外文翻译 原文 Foreign Direct Investment in China: Determinants and Effects Material Source: network platform Author: Stephanedees 1. Foreign Direct Investment in China FDI represents the most important source of foreign capital in China. It surpassed foreign borrowing for the first time in 199
2、2. Before 1979, no foreign-owned enterprises operated in China as foreign money was viewed with suspicion by Chinese leaders. The Open Door Policy introduced by Deng Xiaoping in 1979 involved a different attitude toward FDI. This change can be explained by two major factors the disastrous economic p
3、erformance before 1979 and the successful examples of Japan and the four Asian Tigers. 1949, was lifted. Deng Xiaoping promoted FDI reforms, acknowledging that foreign investment might absorb foreign capital, attract advanced technology and develop export products (Harding, 1987). In 1979, a foreign
4、 investment law was adopted. The aim of this law was to limit the establishment of foreign firms in China geographically to the four Special Economic Zones and in the coastal areas, organizationally to equity joint ventures, and sect orally to hotel construction and energy extraction. However, each
5、of these restrictions was removed over time. The first phase, from 1979 to 1983, is a period of sluggish increase. From 1984 to 1991, the inflows of FDI attained an increasing trend. Since 1992, the large-scale expansion of FDI has made China the second largest recipient of FDI in the world. Before
6、1983, the growth rate of FDI was quite modest. The number of projects was nearly constant, increasing only from 230 in 1979 to 396 in 1983 (the value increased from $0.5 billion in 1979 to $1.5 billion in 1983). During this first phase, foreign investors took a wait-and-see attitude, looking for mor
7、e information before investing in China. The predominance of investors from Hong Kong and Macao was mostly due to geographic and cultural proximity rather than to the incentives offered by the Chinese authorities. In 1983, with the extension of the legal framework and the enlarged flexibility given
8、to investors, foreign investment grew faster. However, the absorption of FDI in China had been too low for the Chinese authorities. Furthermore, the nature of the foreign funded enterprises (Fees hereafter) had been unsatisfactory to Beijing (Harding, 1987). These Fees had been too small with low 2
9、levels of capitalization and non-advanced technology. The economic environment had not encouraged foreign investors to build advanced-technology firms in China. The main reasons were the convertibility issue, the incomplete legal system, the low quality of labors and the difficulties in obtaining so
10、me raw materials. Some investors threatened to withdraw from their projects in China if the investment environment did not improve. In 1986, the Chinese leaders decided to restore investors confidence by implementing incentives to the foreign business community. Four sets of incentives were offered
11、in October 1986 (Har Ling, 1987): there were reductions in land use fees, taxes, the cost of some inputs, and the wage rates paid by Fees； access to inputs controlled by the state was improved (water, electricity, communication, transportation and rennin loans)； there was an attempt to improve burea
12、ucratic efficiency (especially in foreign investment project authorizations) and greater flexibility was guaranteed in decisions on production, export, import and employment. Between 1984 and 1991, FDI inflows into China grew 44% per annum in value terms. In 1991, the realized FDI inflow reached $4.
13、7 billion. From 1992 the flow of FDI has increased dramatically, reaching $31.5 billion in 1994 and $42 billion in 1996 (Work Bank, 1997). Most FDI originates from the Asia-Pacific region (74.5% of total FDI stock comes from the East Asian Newly Industrialized Economies Niles hereafter).Hong Kong ha
14、s always been Chinas major investor. It accounts for 61% of FDI stock in 1994. It has been concentrated in the traditional industries such as metal products, garment manufacturing, textiles, electronics and plastic conversion. It is worth noting that a substantial share of foreign investments is in
15、fact domestic capital that has round-tripped its way through Hong Kong and back to the mainland to take advantage of the tax privileges available to foreign investors (World Bank, 1997). This leads to overvalued FDI inflows into China (one estimate suggests that up to 20% of recent inflows were dome
16、stic capital that was round-tripped). The United States are an important investor with 8% of the FDI stock in 1994 (the third largest source). Even if Western European countries are the main source in international direct investment in the world, their share in China is relatively small； only the UK
17、s share in FDI stock is above 1%. The open-door-policy encouraged the dramatic development of FDI in China. The growth of FDI was a key-element of the Chinese success, not only because it had positive impacts on the economy, but also because it implied a change in the way of thinking in the politica
18、l sphere. China 3 cannot continue to develop without increasing openness to the rest of the world. FDI is probably the best way to encourage the pursuit of the open door-policy and to sustain the economic performance observed since 1978 in the future. However, the large scale expansion of FDI that C
19、hina has experienced in recent years seems to be limited in its duration. The high FDI inflows in China in 199395 were exceptional and have fallen back to a more sustainable level in the long run (World Bank, 1997). Many reasons explain this necessary reduction on FDI inflows. They include the elimi
20、nation of tax concessions for foreign investors in 1996 and the slowdown in the upsurge in transfers of labors-intensive assembly operations from East Asian neighbors. 2 Determinants of Chinese inward FDI According to Zang (1995), the sharp rise of FDI since 1987 has been due to the improving of the
21、 environment and to the impressive growth of the Chinese economy. However, prior to then, investors were reluctant to invest in China because of the features peculiar to a Centrally Planned Economy that implied too high risks as compared to profits. Huang and Shirai (1994) show that the pattern usua
22、lly observed for FDI in developing countries is appropriate for China. After a sluggish inflow and a period of fluctuation, FDI has grown rapidly. Once the degree of uncertainty has declined, investors have been more attracted by the location of their production in China, even if a lack of regional
23、or industry-specific information is an important remaining uncertainty. The role of the authorities is highly important in revealing new information and in improving the investment environment (Huang and Shirai, 1994). Grub et al. (1990) have used interviews and questionnaires to study the motivatio
24、ns of US firms who invest in China. Among the positive variables, they find that the potential market and cheap labour are the most important determinants of US investments. However, it was shown that investment incentives provided by the Chinese authorities were only moderately significant for the
25、US firms in making investment decisions. It is worth noting that Chinese inward FDI is not a global phenomenon and that there could be differences between the determinants of FDI in China across source countries. For instance, the motives of investors from developing countries (and especially from E
26、ast Asia) are quite specific. For Yue (1993), investments made by the Niles in China aim to capitalize on lower production costs, gain access to natural resources, circumvent protectionist measures of developed countries, and exploit firm-specific advantages such as lower 4 managerial costs, better
27、marketing channels, more appropriate technology and better understanding of host countries than investors from developed countries. Yue underlines also the role of geographical proximity, ethnic and cultural affinity in information flows between the Niles and China. Shi (1996) show that, initially,
28、foreign investors (especially those from Hong Kong and Taiwan) were attracted by cheap labors. FDI was used to produce labors intensive goods in order to re-export them toward their traditional markets. However, since the early 1990s, foreign investors have attached more importance to the quality of
29、 workers in order to produce higher technological products. In this case, labors quality could be another determinant of FDI. To sum up, the motivations of the East Asian Niles refer more to the factor cost advantage and the growing demand of the Chinese market. Some empirical evidence is available
30、from econometric work. Using a panel data set? Wei (1995) runs regressions for the flow and the stock of FDI. He finds a positive and significant effect of the Chinese GNP: a 1 percent increase in the size of a host country is associated with a 0.53 (0.74) percentage point increase in the flow (stoc
31、k) of FDI. He finds also a positive correlation between the inflow of FDI and the stock of human capital in the host country (proxies by literacy). Finally, the effect of distance between the investing country and China is negative confirming the hypothesis that FDI is highly regionalized. Wei only
32、studies the Chinese inward-FDI coming from developed countries. Therefore, his work does not take into account the growing share of the East Asian countries like Taiwan or Korea and also Hong Kong, the largest investor in China. In their study, Liu et al. (1997) analyze, through an error-component m
33、odel, the economic, political and cultural determinants of FDI in China. The panel data set covers a time period of 19831994 and 22 countries/regions as well as mainland China as the host. Hong Kong and the East Asia Niles are taken into account as investor countries. The results show that bilateral trade, cultural differences and relative changes in market size, wage rates, and exchange rates are important explanatory variables for FDI in China. Country risk is not a significant determinant, whilst geographic distance is significant but wrongly signed.
