Foreign direct investment and economic performance in transition economies: Evidence from Chinese provinces

Xiaowen Tian, University of Nottingham
Shuanglin Lin, University of Nebraska
Vai Io Lo, International University of Japan

Abstract

Based upon a production junction with FDI representing updated technology from more developed, market-based economies, this study tests the hypothesis that FDI contributes to the economic growth of less developed, transition economies via technology updating, using data for 30 Chinese provinces from 1985 to 2000. It is found that provinces with a higher FDI ratio experienced faster technology updating and more rapid economic growth. The study suggests that less developed, transition economies should encourage FDI from more developed, market-based economies so as to accelerate technology updating and economic growth.