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Quality & Quantity
Published in: Quality & Quantity 4/2017

06-06-2016

Congestion costs and differences in the regional distribution of FDI in China

Authors: Hongzhong Fan, Shah Muhammad Kamran, Mingliang Li, Qiliang Zhou

Published in: Quality & Quantity | Issue 4/2017

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Abstract

After implementing the reforms and opening up policies, China has continued to attract huge amount of foreign direct investments (FDI), but these FDI have a noticeably unbalanced spatial distribution. Why does FDI flow mostly into eastern China? Agglomeration economies and congestion costs play an important role in the spatial distribution of FDI in the country. Panel data was compiled for 287 prefectural-level cities and higher administrative units in China from 1999 to 2012 while controlling the effects of regional advantages, preferential policies, natural resources, infrastructure and other factors. Regression results verified that a high agglomeration of FDI in the eastern region of China is significantly attributed to the effects of congestion costs. Because of the particularities of the Chinese labour market and the monopolization of land market in cities, congestion costs lose the ability to regulate the spatial distribution of FDI and exert a reverse effect to distribute FDI more unevenly. In order to further open up inland regions and facilitate coordinated development between regions, the government must implement some preferential policies that encourage the flow of FDI into inland regions.
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Appendix
Available only for authorised users
Footnotes
1
\(X_{ij} = {{K(Y_{i} )^{a} (Y_{j} )^{b} }/ {(1 + eD_{ij} )^{f} }}\). Thereinto, X ij is the total export of country i to coutry j, Y i and Y j respectively are the GNP of country i and coutry j, D ij is the distance between country i and country j, K and e are two constants, a and b are two parameters.
 
2
Except otherwise specified, housing price refers to the average selling price of commodity housing in this paper.
 
3
The labourers from rural areas who work outside their local town or township for 6 months or longer time within the year of the survey.
 
4
See a Simple Survey on the Life of Peasant Workers, http://​www.​chianzhaogong.​com/​news/​ab1ea8b5eb1b4a1e​6bd7f3530af0118c​.​html, 2012–02–10.
 
5
See the Research Report of China Youth and Children Research Center on Career Development and Inter-generation Comparison of New-generation Peasant Workers in China.
 
6
See Jianfeng (2006). “Who Is the Biggest Real Estate Speculator in China?”, China Economic Times, March 17, 2006.
 
7
In order to save space, we merely report empirical results that use GDP density as the proxy variable of economies of agglomeration. Empirical results that use population density and road density as the proxy variable of economies of agglomeration have similar results as Table 4. If readers are interesting it those results, please give email to us.
 
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Metadata
Title
Congestion costs and differences in the regional distribution of FDI in China
Authors
Hongzhong Fan
Shah Muhammad Kamran
Mingliang Li
Qiliang Zhou
Publication date
06-06-2016
Publisher
Springer Netherlands
Published in
Quality & Quantity / Issue 4/2017
Print ISSN: 0033-5177
Electronic ISSN: 1573-7845
DOI
https://doi.org/10.1007/s11135-016-0366-6

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