Information Externalities Affecting the Dynamic Pattern of Foreign Direct Investment: The Case of China

April 1, 1994

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Format: Chicago

Sayuri Shirai, and Dongpei Huang. Information Externalities Affecting the Dynamic Pattern of Foreign Direct Investment: The Case of China, (USA: International Monetary Fund, 1994) accessed November 12, 2024

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

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.

Subject: Balance of payments, Environment, Foreign direct investment, Special economic zones, Taxes

Keywords: A number of investor, Asia and Pacific, Foreign direct investment, Investment environment, Investors' expectation, Investors from Hong Kong, Investors search, Pioneer investor, Southeast Asia, Special economic zones, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/044
Stock No:

WPIEA0441994
ISBN:

9781451974645
ISSN:

1018-5941

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