FDI Flows to Asia: Did the Dragon Crowd Out the Tigers?

September 1, 2005

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

China's dramatic success in attracting foreign direct investment (FDI) has raised concerns that it has success diverted FDI from other countries in Asia. We develop a new methodology to estimate crowding out, and we use it to investigate the impact of China's emergence on FDI flows to Asia using data from 14 Asian economies from 1984 to 2002. The results suggest that China did not have much impact on FDI to other countries. In particular, lowincome economies, which compete with China for low-wage investment, and countries with low levels of education or scientific development do not seem to have been especially affected.

Subject: Balance of payments, Foreign direct investment, Foreign exchange, Government debt management, Public financial management (PFM), Real exchange rates

Keywords: Asia and Pacific, China, crowding out, diversion, FDI, FDI determinant, FDI flow, FDI to China, flows to China, Foreign direct investment, Global, Government debt management, Real exchange rates, Taiwanese FDI, WP

Pages:
30
Volume:
2005
DOI:
https://doi.org/10.5089/9781451862089.001
Issue:
189
Series:
Working Paper No. 2005/189
Stock No:
WPIEA2005189
ISBN:
9781451862089
ISSN:
1018-5941

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