Foreign Direct Investment in China: A Spatial Econometric Study

Location decisions of Japanese new manufacturing plants in China: a discrete-choice analysis

“…This discrepancy appears across methodological boundaries and therefore arises independent of specific methods used in the analyses. In line with the conventional wisdom, higher labor cost was found to be a deterrent to FDI (Belderbos and Carree 2002;Cheng and Kwan 2000;Coughlin and Segev 2000a;Fung et al 2002;Wei and Liu 2001). On the other hand, Broadman andSun (1997), Chen (1996), and Head and Ries (1996) indicated a statistically insignificant correlation between the geographic distribution of FDI and labor cost.…”

“…Fu (2000) argued that the provincial market potential approach is appropriate because of China's highly segmented markets resulting from Mao's developmental strategy. Along with the provincial approach, indicators of market size include provincial gross domestic product (GDP) (Cassidy 2002;Fu 2000;Fung et al 2002;Sun et al 2002), provincial gross national product (GNP) (Broadman and Sun 1997;Coughlin and Segev 2000a), provincial income per capita (Chen 1996;Sun et al 2002), and provincial GDP growth (Wei et al 1999). On the contrary, the other approach believes that foreign manufacturing affiliates are able to serve not only their provincial markets but also the entire national market.…”

“…Broadman and Sun (1997), Chen (1996), Fung et al (2002, Sun et al (2002), and Zhao and Zhu (2000) used average wages without controlling labor productivity. Coughlin and Segev (2000a) and Head and Ries (1996) also used the average wages, but they introduced a separate variable to (2002), He (2001), and Wei et al (1999) employed the effective wage, which is the ratio of average wages to labor productivity, as their indicator of labor cost. Fu (2000) replaced the effective wage by effective manufacturing wages.…”

“…Broadman and Sun (1997) and Coughlin and Segev (2000a) used the adult illiteracy level as their indicator for labor quality. Sun et al (2002) measured the relative endowment of skilled workers by the numbers of scientists, engineers, and technicians per 1,000 employees.…”

How can western China attract FDI? A case of Japanese investment

“…On the one hand, high labor costs, intuitively, are deterrents to FDI inflows (Cheng and Kwan 2000;Coughlin and Segev 2000;Fung et al 2002). On the other hand, Zhao and Zhu (2000) found a positive relationship between labor cost and FDI inflows, i.e., higher wages actually attract FDI.…”