The Giant Sucking Sound: Is China Diverting Foreign Direct Investments from Other Asian Economies?

Chantasasawat, Busakorn; Fung, K. C.; Iizaka, Hitomi; Siu, Alan

doi:10.2139/ssrn.711204

Cited by 7 publications

(11 citation statements)

References 10 publications

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“…In particular, we have estimated a modified 27 Several studies have shown that FDI flows to China have not diverted FDI from other Asian countries. For example, see Humphrey and Schmitz (2007), Weiss (2007), Chantasasawat et al (2004) and Tong (2006a and2006b). 28 A similar effect has been found by García-Herrero and Santabárbara (2007) in relation to the impact of FDI to China on FDI flows to Latin America.…”

Section: Discussionmentioning

confidence: 77%

Is foreign direct investment to China crowding out the foreign direct investment to other countries?

Resmini

Siedschlag

2013

China Economic Review

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We estimate a theory-based modified gravity model to analyze the effects of foreign direct investment (FDI) to China on FDI to other countries over the period [1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001][2002][2003][2004]. Our results suggest that on average, ceteris paribus, FDI flows to China have been complementary to FDI flows to other countries. However, these complementarities exhibit a decreasing trend over time and vary between and within country groups. Furthermore, our results suggest that while the FDI to China has encouraged both horizontal and vertical FDI to other countries, these FDI complementarities have been strongest in the case of vertical FDI. Tong, 2006a, 2006b;Cravino, Lederman and Olarreaga, 2007;García-Herrero and Santabárbara, 2007). To the best of our knowledge, this is the first in-depth analysis of the effects of FDI in China on the FDI inflows into EU countries.Our results suggest that on average, ceteris paribus, FDI inflows into China have been complementary to FDI inflows into other countries. This complementary effect is less intense in the EU than in the other recipient countries; it exhibits a decreasing trend over time and varies across countries. Furthermore, our findings suggest that complementary relationships with China are more likely to occur in countries that attract high levels of vertical FDI in comparison with countries where horizontal FDI dominate.The remainder of this paper is organized as follows. Section 2 discusses the theoretical and empirical background for our analysis. Section 3 explains our empirical strategy and the model specifications. In section 4 we describe the data set that we use. The results of our

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Section: Discussionmentioning

confidence: 77%

Is foreign direct investment to China crowding out the foreign direct investment to other countries?

Resmini

Siedschlag

2013

China Economic Review

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“…Investigation of the China effect was first introduced in Chantasasawat et al . (). The paper classified the China effect into three possibilities: creation, diversion, or a neutral effect.…”

Section: Literature Reviewmentioning

confidence: 97%

“…As such, while Chantasasawat et al . () had shown a crowding‐in China effect, others found a crowding‐out, inconclusive, or ambiguous China effect.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Chantasasawat et al . () provided empirical results indicating that China's FDI encourages FDI inflows to East Asian countries, which means a crowding‐in effect. Later, Chantasasawat et al .…”

Section: Literature Reviewmentioning

confidence: 99%

“…Wang et al (2007) found ambiguous results for the China effect on other East Asian countries; China crowded in India and the Philippines but crowded out Indonesia, Korea, Malaysia, and Taiwan. As such, while Chantasasawat et al (2004) had shown a crowding-in China effect, others found a crowding-out, inconclusive, or ambiguous China effect.…”

Section: Introductionmentioning

confidence: 99%

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The Effect of China's Rise on FDI Competition in East Asia: Crowding‐out or Crowding‐in?

Sohn

2016

Scottish J Political Eco

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This paper investigates the China Effect on FDI competition in East Asia: Does China's FDI crowd out or crowd in FDIs in ASEAN countries? Previous research utilized a gravity equation that has no theoretical foundation for FDI flows. This study applies a theory‐based Knowledge‐Capital Model modified to incorporate preferential market‐openings by FTAs and BITs that directly affect investment and trade costs. Using country‐pair data for China and ASEAN with 34 OECD home countries during 1985–2010, panel analyses are performed. The results suggest that China's rise does not threaten ASEAN countries but induces a strong synergetic effect on FDIs into them. In attracting FDI inflows, China and ASEAN countries are friends, not foes.

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The Rise of China and Its Implications

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The Giant Sucking Sound: Is China Diverting Foreign Direct Investments from Other Asian Economies?

Cited by 7 publications

References 10 publications

Is foreign direct investment to China crowding out the foreign direct investment to other countries?

Is foreign direct investment to China crowding out the foreign direct investment to other countries?

The Effect of China's Rise on FDI Competition in East Asia: Crowding‐out or Crowding‐in?

The Rise of China and Its Implications

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