Foreign Direct Investment in East Asia and Latin America: Is there a People's Republic of China Effect?
Chantasasawat, Busakorn; Fung, K.C.; Iizaka, Hitomi; Siu, Alan | June 2005
Abstract
In recent years, the People’s Republic of China (PRC) has emerged as the world’s largest recipient of foreign direct investment (FDI). Many analysts and government officials in the developing world have expressed concern that they are losing competitiveness to the PRC. Is the PRC diverting FDI from other developing countries? Theoretically, a growing PRC could add to other countries’ FDI by creating more opportunities for production networking and raising the need for raw materials and resources. At the same time, the extremely low labor costs in the PRC might lure multinational enterprises (MNEs) away from other developing countries when they considered alternative locations for low-cost export platforms. In this paper, we explore this important research and policy issue empirically. We focus on East and Southeast Asia as well as Latin America. For Asia, we use data for eight economies (Hong Kong, China, Taipei,China, Republic of Korea, Singapore, Malaysia, Philippines, Indonesia and Thailand) for 1985-2002, while for Latin America, we use data for sixteen economies (Argentina, Bolivia, Brazil, Chile, Columbia, Costa Rica, Ecuador, El Salvador, Guatemala, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela) for 1990–2002. We control for the standard determinants of inward direct investment. We then add the PRC’s inward FDI as an indicator of the “PRC Effect.” An estimation of the coefficient associated with the PRC Effect proxy gives us indications about its existence. We obtain three results: (1) the level of the PRC’s foreign direct investment is positively related to the levels of inward direct investments of economies in East and Southeast Asia, while it is mostly insignificant for Latin American economies; (2) the level of the PRC’s FDI is negatively related to the direct investment into these economies as shares of total foreign direct investments in the developing countries; (3) the PRC Effect is generally not the most important determinant of inward direct investment for these economies. Market size and policy variables such as openness and corporate tax rates tend to be more important.
Citation
Chantasasawat, Busakorn; Fung, K.C.; Iizaka, Hitomi; Siu, Alan. 2005. Foreign Direct Investment in East Asia and Latin America: Is there a People's Republic of China Effect?. © Asian Development Bank Institute. http://hdl.handle.net/11540/4172. License: CC BY 3.0 IGO.Keywords
Development
Finance
Development Challenges
Development Issues
Development Problems
Microenterprises Finance
Commercial Finance Companies
Enterprise Financing
ADB
Project finance
Development plans
Strategic planning
Business Financing
Investment Requirements
Insurance Companies
Insurers
Insurance stocks
Insurance holding companies
Insurance carriers
Insurance agencies
Business subsidies
Investment companies
Foreign investment
Show allCollapse
Citable URI
http://hdl.handle.net/11540/4172Metadata
Show full item recordUsers also downloaded
-
Annual Report 2014: Operational Data
Asian Development Bank (Asian Development Bank, 2015-01-01)The page has additional information for the ADB Annual Report 2014. In 2014, the Asian Development Bank (ADB) approved $22.93 billion in development assistance, including $13.69 billion financed by ADB’s ordinary capital resources and special funds, and a record $9.24 billion by cofinancing partners. Disbursements totaled $10.01 billion, an increase of $1.47 billion (17%) from 2013, and the first ...The page has additional information for the ADB Annual Report 2014. In 2014, the Asian Development Bank (ADB) approved $22.93 billion in development assistance, including $13.69 billion financed by ADB’s ordinary capital resources and special funds, ... -
Annual Report 2014: Organizational Information
Asian Development Bank (Asian Development Bank, 2015-01-01)The page has additional information for the ADB Annual Report 2014. In 2014, the Asian Development Bank (ADB) approved $22.93 billion in development assistance, including $13.69 billion financed by ADB’s ordinary capital resources and special funds, and a record $9.24 billion by cofinancing partners. Disbursements totaled $10.01 billion, an increase of $1.47 billion (17%) from 2013, and the ...The page has additional information for the ADB Annual Report 2014. In 2014, the Asian Development Bank (ADB) approved $22.93 billion in development assistance, including $13.69 billion financed by ADB’s ordinary capital resources and special ... -
From Strategy to Practice: The Tonle Sap Initiative August 2006
Serrat, Olivier (Asian Development Bank, 2006-08-06)The Tonle Sap is a natural phenomenon. In the rainy season, the level of water in the Mekong River exceeds the elevation of the largest freshwater lake in Southeast Asia and forces the Tonle Sap River to flow upstream. The lake swells and fish, reptiles, birds, mammals, and plants thrive on this reverse hydrology. The Tonle Sap Basin Strategy promotes an approach that conserves nature and offers ...The Tonle Sap is a natural phenomenon. In the rainy season, the level of water in the Mekong River exceeds the elevation of the largest freshwater lake in Southeast Asia and forces the Tonle Sap River to flow upstream. The lake swells and fish, ...