Manufacturing agglomeration as incentives to Asian FDI in China after WTO

摘要

The economic reform in China represents a fundamental change and overhaul of her value system, law making, institutional infrastructure, and social-economic structure, which constitute a necessary step for mobilizing foreign direct investment (FDI). The significant spatial concentration of FDI is viewed as reflecting agglomeration effects generated in selected regions that are put forward as the main explanation for the observed spatial pattern of FDI. This object of this paper is: (1) to review the construction of a legal/institutional infrastructure to support FDI specific policies, along with the continuous reforms and market opening which have facilitated the current FDI growth in China; (2) to investigate the spatial distribution of China's FDI at the greater regional level; (3) to empirically demonstrate the effects of agglomeration on FDI absorption at a less aggregate city-level; and (4) to discuss the implications of the foregoing on the volume of future FDI flows with special reference to Asian FDI in China. The research results indicate that the dynamics of FDI evolution are closely associated with the process of legal modernization and policy reforms via institutionalization that are required to move toward a market-oriented host country for global international capital. Further FDI absorption after WTO will follow the market power of agglomeration economies, which may further strengthen China's current biased regional growth pattern.