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

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

doi:10.1162/1535351054825201

Cited by 14 publications

(2 citation statements)

References 12 publications

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“…In other words, the effectiveness of the IQ of ASEAN countries is conditional upon the changes in China’s IQ (see illustration in the Appendix). The inclusion of FDIC is consistent with the findings of Chantasasawat et al (2004) and Chen (2010) to examine whether or not FDI inflows into China are at the expense of FDI inflows into ASEAN countries. It is therefore added to confirm the presence of China’s threat or effect.…”

Section: Methodssupporting

confidence: 81%

Relative institutional quality and FDI inflows in ASEAN countries

Masron

2017

JES

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Purpose Foreign direct investment (FDI) inflows into any country, especially ASEAN countries, is affected by any improvement in the institutional quality (IQ) of competitors such as China. As generally investors make decisions by comparing two countries’ IQ, the ratio of two countries’ IQ matters more than a single country’s IQ. The purpose of this paper is to re-examine the role of IQ on FDI inflows in ASEAN countries for the period 1996-2013. Design/methodology/approach With limited information on IQ, this study pools eight ASEAN countries as the sample for analysis from 1996 until 2013. A panel dynamic approach – namely, dynamic ordinary least square and fully modified ordinary least square – is utilized. Findings This study confirmed that relative IQ significantly affects FDI inflows into ASEAN countries. The low effect is more reflective of the small portion of world FDI inflows into the ASEAN region. Research limitations/implications This study observes the crucial relationship between IQ and FDI – that the relative effectiveness of IQ in attracting FDI inflows depends heavily on the changes in both countries’ IQ. Hence, the effort of ASEAN countries to improve IQ and use it as a means to lure FDI inflows should go beyond a mere improvement. Focus should be on significant improvement of IQ so that multinational corporations will comfortably remain or inject new FDI into the country. Practical implications Every ASEAN country should double their efforts toward improving their IQ in order to attract future FDI. Originality/value Several studies have confirmed the role of IQ on FDI inflows. However, the majority of these studies have investigated the effect of IQ exclusively for a specific country even though some of them have used a panel of several countries’ data. On the other hand, investors normally evaluate their decision on whether or not to invest based on the relative terms, comparing several potential locations of investment at once. This study can be considered the first to explore the potential effect of IQ after taking into account the possibility of each ASEAN country’s IQ being easily offset by changes in the IQ of China.

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Section: Methodssupporting

confidence: 81%

Relative institutional quality and FDI inflows in ASEAN countries

Masron

2017

JES

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“…Chantasasawat et al (2004) examine FDI to eight East Asian countries between 1985 and 2001. Their results suggest that various institutional factors are among the most important determinants of FDI.…”

Section: Institutional Factors Infrastructure and The Role Of Exportmentioning

confidence: 99%

Foreign direct investment and growth in East Asia: lessons for Indonesia

Lipsey

Sjöholm

2011

Bulletin of Indonesian Economic Studies

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Foreign direct investment (FDI) has been important in the growth and global integration of developing economies. Both Northeast and Southeast Asia, especially the latter, have been part of this development, with increasing inflows of FDI and greater foreign participation in local economies. However, Indonesia has been an outlier within the region. Inflows of FDI have been lower to Indonesia than to other countries, especially in manufacturing, and they have been lower than could be expected from Indonesia's size, population and other country characteristics. We show that the inflows that have occurred have benefited Indonesia, and use the East Asian experience to identify measures that are likely to increase these flows. A relatively poor business environment, inefficient government institutions, low levels of education and poor infrastructure all seem to be important explanations for the low inflows of FDI to Indonesia.

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Effects of the Belt and Road Initiative on the Domestic Economies of Participating Countries

Joshua¹

2019

The Belt and Road Initiative and the Global Economy

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

Cited by 14 publications

References 12 publications

Relative institutional quality and FDI inflows in ASEAN countries

Relative institutional quality and FDI inflows in ASEAN countries

Foreign direct investment and growth in East Asia: lessons for Indonesia

Effects of the Belt and Road Initiative on the Domestic Economies of Participating Countries

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