Location of foreign direct investment in Peoples Republic of China, 1979--1993: Application of a new locational framework

This thesis addresses the spatial dimension of foreign direct investment (FDI) with a subnational context with reference to the P.R. China during the period of 1979-1993. The framework for the location of FDI within a subnational context includes three dimensions: (1) the dimension of firm specific variables (FSVs), (2) the dimension of location specific variables (LSVs), and (3) the temporal and dynamic dimension. Within this framework, the general locational models of FDI in China are built, the dynamic changes over time examined, and the effects of country of origin tested. This research also takes the initiative to examine the locational characteristics for the presence of FDI. The presence of FDI is differentiated from the spatial distribution of the total amount of FDI in this research.The presence of FDI was found to be affected by a city's geographic location as referred to the coast of China. In addition, larger cities were more likely to receive any amount of FDI. Over time, other factors such as urban infrastructure and market potential of a city also increased its chance to become an FDI recipient city.It was found that the most important factor that affected the spatial distribution of FDI in China was the city size factor. The implication of market potential was evident at later stages of FDI involvement. Government policy also had significant bearing on foreign investors' locational decisions. Its impact, however, lessened and wound down starting in 1991 when FDI in China entered a full-fledged and mature stage. Aside from affecting the spatial distribution, larger size and special policy status of a location also encouraged the presence of FDI.The effect of country of origin on the presence and the spatial distribution of FDI was evident. Distinct differences were found between FDI from developed countries and that from newly industrialized countries (NICs) such as Hong Kong and Singapore. Investors from NICs were more responsive to policy aspects of a location, while investors from developed countries paid more attention to the built-up merits of a location. These locational differences may be attributed to different industrial compositions as well as different firm specific advantages and characteristics which can be identified with different home countries.