Political economy of FDI and economic growth in China: A longitudinal test at provincial level

This study asks two central questions: (1) how we can explain the dynamic relationships between economic growth and FDI distributions at national and regional levels; (2) what determines Chinese rapid economic growth and unprecedented volume of FDI at national and regional levels. Two empirical models are developed to test the two main hypotheses of FDI-led growth model and growth-driven FDI model based on time-series and cross-provincial data of 174 observations (29 provinces for 6 years, 1995–2000). The results confirm main findings of earlier studies on the links between FDI and economic growth in China, but disapprove the impact of human capital, historical, and geographical conditions on FDI distributions in the regions during the research period.