Information Externalities Affecting the Dynamic Pattern of Foreign Direct Investment: The Case of China
Summary:
The dynamic pattern of foreign direct investment (FDI) in developing countries shows a three-phase pattern. Despite government policies that promote it, initially the inflow of FDI is sluggish, followed by a period of considerable fluctuation before finally entering the stage of rapid growth. The paper explains the pattern through recourse to two concepts: the searching process of individual investors and the information externalities of investors in the aggregate. Policy implications that may serve to shift an economy of a developing country from small-scale FDI to one of rapidly expanding FDI are considered. As China is a clear example of this pattern, it has been selected to promote understanding of the process.
Series:
Working Paper No. 1994/044
Subject:
Balance of payments Environment Foreign direct investment Special economic zones Taxes
English
Publication Date:
April 1, 1994
ISBN/ISSN:
9781451974645/1018-5941
Stock No:
WPIEA0441994
Pages:
28
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