nep-cna New Economics Papers
on China
Issue of 2007‒09‒30
four papers chosen by
Zheng Fang
Ohio State University

  1. Institutions and Foreign Investment: China versus the World By Joseph P.H. Fan; Randall Morck; Lixin Colin Xu; Bernard Yeung
  2. Foreign direct investment in Latin America during the emergence of China and India : stylized facts By Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
  3. Substitution between foreign capital in China, India, the Rest of the world, and Latin America : much ado about nothing ? By Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier

  1. By: Joseph P.H. Fan; Randall Morck; Lixin Colin Xu; Bernard Yeung
    Abstract: Weak institutions ought to deter foreign direction investment (FDI), and mass media stories highlight China's institutional deficiencies, yet China is now one of the world's largest FDI destinations. This incongruity characterizes China's paradoxical growth. Cross-country regressions show that China's FDI inflow is not exceptionally large, given the quality of its institutions and its economic track record. Institutions clearly determine a country's allure as an FDI destination, but standard measures of institutional quality can be problematic for countries undergoing rapid institutional development, and can usefully be augmented by economic track record measures. Deng Xiaoping's 1993 "southern tour" heralded sweeping reforms, and this regime shift is insufficiently reflected in commonly used measures of institutional quality. China's FDI inflow surge after these reforms resembles similar post-regime shift surges in the East Bloc, and so is also unexceptional. Recent arguments that China's FDI inflow is inefficiently large because weak institutions deter domestic investment while special initiatives attract FDI are thus either unsupported or not unique to China.
    JEL: F21 F23 G15 G38 O19 O43 O53 P34
    Date: 2007–09
  2. By: Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
    Abstract: In spite of the growing concerns about foreign direct investment being diverted from Latin America to China and India, the best available data show that Latin America has performed relatively well since 1997. Foreign capital stocks from OECD countries and the United States in particular in China and India are still far from those in the largest Latin American economies. The evidence shows that foreign capital stocks in China increased more than in Latin America during 1990-1997, but not as much since 1997. In fact, Latin America has actually performed better than China since 1997 given its lack of relative growth. The growth of foreign capital stocks in India was more stable than in China. Nonetheless, after controlling for shocks emanating from the source countries and bilateral distance between source and host countries, this paper finds a significant change in foreign capital stocks relative to China between 1990 and 1997, but no change relative to India.
    Keywords: Debt Markets,Transport and Trade Logistics,Common Carriers Industry,,Corporate Law
    Date: 2007–09–01
  3. By: Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
    Abstract: This paper explores the impact of the emergence of China and India on foreign capital stocks in other economies. Using bilateral data from 1990-2003 and drawing from the knowledge-capital model of the multinational enterprises to control for fundamental determinants of foreign capital stocks across countries, the evidence suggests that the impact of foreign capital in China and India on other countries ' foreign capital stocks has been positive. This finding is robust to the use of ordinary least squares, Poisson, and negative binomial estimators; to the inclusion of time and country-pair fixed effects; to the inclusion of natural-resource endowments; and to the use of the sum of foreign capital stocks in Hong Kong (China) and mainland China instead of using only the latter ' s foreign capital stocks. There is surprisingly weak evidence of substitution in manufacturing foreign capital stocks away from Central America and Mexico in favor of China, and from the Southern Cone countries to India, but these findings are not robust to the use of alternative estimation techniques.
    Keywords: E-Business,Foreign Direct Investment,Economic Theory & Research,Debt Markets,Currencies and Exchange Rates
    Date: 2007–09–01
  4. By: Jing Gao (Département des sciences administratives, Université du Québec (Outaouais))
    Abstract: The Agricultural Development Bank of China (ADBC) seeks a complete economic evaluation of the Loaning Funds Program to support private agricultural product processing factories. This paper aims at economically evaluate one loaning project of ADBC : the soybean processing of Huabao Industrial Co. Ltd.
    Keywords: Project management, Cost-benefit analysis
    JEL: M
    Date: 2007–09–17

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