《《Foreign Direct Investment in China- Effects on Growth and Economic Performance》.pdfVIP

FOREIGN DIRECT INVES TMENT IN CHINA: Effects on Growth and Economic Performance Edward M. Graham Senior Fellow Institute for International Economics Erika Wada Research Associate Institute for International Economics To appear in Achieving High Growth: Experience of Transitional Economies in East Asia , Peter Drysdale, editor, Oxford University Press, forthcoming 2001. The authors wish to thank Dr. Chi Zhang (Stanford University), Dr. Jun Ma (Deutschebank), Professor Lori Kletzer (University of California and IIE), and Dr. Aasim M. Husain (International Monetary Fund) for valuable input and comments on earlier drafts of this paper. . INTRODUCTION By almost all accounts, foreign direct investment (FDI) in China has been one of the major success stories of the past 10 years. Starting from a base of less than $19 billion in 1990, the stock of FDI in China rose to over $300 billion at the end of 1999. Ranked by the stock of inward FDI, China thus has become the leader among all developing nations and second among the APEC nations (only the United States holds a 1 larger stock of inward FDI). China’s FDI consists largely of greenfield investment, while inward FDI in the United States by contrast has been generated more by takeover of existing enterprises than by new establishment, a point developed later in this paper. The majority of FDI in China has originated from elsewhere in developing Asia (i.e., not including Japan). Hong Kong, now a largely self-governing “special autonomous regio