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- Title
Congestion costs and differences in the regional distribution of FDI in China.
- Authors
Fan, Hongzhong; Kamran, Shah; Li, Mingliang; Zhou, Qiliang
- 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.
- Subjects
CHINA; CONGESTION pricing; FOREIGN investments; ECONOMIES of agglomeration; ECONOMIC policy; INFRASTRUCTURE (Economics); ECONOMICS
- Publication
Quality & Quantity, 2017, Vol 51, Issue 4, p1789
- ISSN
0033-5177
- Publication type
Article
- DOI
10.1007/s11135-016-0366-6