Home Country Tariffs and FDI in China
Abstract: To date China has become one of the largest receivers of foreign direct investment (FDI) and this FDI has had an important role in China’s economic growth. It is therefore important to study the determinants of FDI in China. This paper evaluates if general applied tariffs on Chinese imports in China’s trading partners influence the amount of FDI to China. In previous studies this approach has not been applied as the literature mainly looks at tariffs in China as a FDI determinant and not tariffs in investing countries. The study contains of two parts, one quantitative study, where panel data is applied for FDI stock and other economic indicators, and one qualitative study, where managers for FDI receiving firms in China are interviewed. The quantitative study found that general tariffs in investing countries on Chinese imports have a weak correlation with FDI stock in China. The interviews in the qualitative study reject the correlation as well. In conclusion, the concerned tariffs do not determine the FDI stock in China. However, this study also found that non-tariff barriers, such as anti-dumping duties and other regulations, influence the investments and productivity of FDI receiving firms in China.
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