The Determinants of FDI Inflows in China——Evidence from DCs and LDCs
Author: Sihong Wu, Australia
Abstract: This paper uses the data of China’s foreign direct investment (FDI) inflows from 1997 to 2016 to analyze the determinants of China’s attraction of FDI from developed countries (DCs) and lessdeveloped countries (LDCs). By constructing a complete information game model, this paper first deduces that China’s attraction of FDI will help to improve its technical level. After empirical analysis, the following conclusions have been drawn: (1) In general, the main factor affecting China’s attraction of FDI is the R&D level. (2) The number of FDI inflows in China from DCs has a positive relationship with the number of China’s labor force, and has a negative relationship with its salary level. (3) LDCs’ FDI in China will decrease with the increase in China’s R&D level and social insurance costs, and will increase as China’s salary expenditure increases. This paper has contributed to the literature on the determinants of Chinese FDI inflows by DCs and LDCs.