A Comparative Analysis On The Determinants Of FDI In The Four Economic Regions Of China

China has become an attractive destination for foreign direct investment (FDI). By theend of2011, the accumulated FDI inflows in China reached USD1.17trillion. FDIencourages economic growth by increasing capital formation, providing employmentopportunities and introducing advanced technologies. However, due to its morefavorable geographic location and the industrial development in the coastal region,more than70per cent of FDI inflows have gone to the coastal region, leaving thethree inland regions, namely the northeast, central and western regions, to share theremainder. The issue of continued uneven regional distribution of FDI inflows inChina has given rise to concerns regarding its effect on increasing regional economicdevelopment disparities.Two issues represent a substantial challenge to current policy-makers attempting toreduce regional disparity by guiding FDI inflows into less developed inland regions.The first relates to the identification of the determinants of FDI inflows for individualregions, the second issue involves whether these factors have the same effects on FDIlocation decisions in each region.In order to address these two issues, multiple regression models based on four paneldata sets are used to examine the determinants of FDI inflows in each region. Theresults confirm that FDI is attracted by different factors and these factors are specificto each region.Based on the empirical results, recommendations for policy-makers are provided,which will help them to better utilize FDI inflows based on regional comparativeadvantages and thus to reduce regional disparities.