Foreign Direct Investment in East Asia and Latin America: Is there a People's Republic of China Effect?
There is widespread concern in many parts of Asia and Latin America that rising foreign investment to the People's Republic of China (PRC) is at the expense of investment and jobs in these economies.This paper examines this fear empirically using a regression model to explain foreign investment in these economies.
Contrary to popular opinion, foreign investment to PRC appears to stimulate investment to rather than divert investment from other countries in Asia. However, it is not the most important factor at work. The size of a country's domestic market and several policy variables are the key factors.
In Latin America, with the possible exception of Mexico, foreign investment to PRC has an insignificant impact on investment to other countries.
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The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
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