What Drive Industrial Development in Low-Income Economies? Role of Foreign Direct Investment in Chinese Manufcturing
DOI:
https://doi.org/10.14738/abr.1012.13562Keywords:
Industrial developmernt (ID); Foreign direct investment (FDI); Absorptive capacity, IndustrializationAbstract
Industrial development (ID) or Industrialization is a must for low-income economies to become developed countries. How does foreign direct investment (FDI) affect ID? This paper aims to answer the question with evidence from a panel dataset of Chinese manufacturing at regional levels in 1990-2020. ID is measured by industrial capacity and industrial technology in both domestic and global markets. Estimate results suggest that (a) FDI fuels China’s industrialization; (b) FDI promotes ID through raising industrial capacity and technology; (c) The positive effects of FDI on seems to be larger on industrial capacity than technology, and larger on exports than domestic markets; and (d) gains from FDI depend significantly on China’s FDI absorptive capacity in terms of infrastructure, human capital, and R&D.
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