ABSTRACT

Foreign investment has been a major source of the capital behind Shenzhen's growth. Compared to other industrial enterprises in Shenzhen, foreign-invested industrial enterprises turned out a better export performance. The export performance of foreign-invested industrial enterprises varied with the sources of investment. Foreign-invested enterprises’ (FIE) export performance and creation of domestic linkages were less than satisfactory. The high import propensity of FIEs was a primary factor underlying their unsatisfactory performance in net exports and foreign exchange earnings. For FIEs in Shenzhen, prices of domestic supplies tended to be higher because of the two-track pricing system in China. Domestic linkages between Shenzhen's FIEs and inland areas can be classified into five types: backward purchases for production in Shenzhen, backward linkage in the form of subcontracting, direct sales on the domestic market, equity investment in inland enterprises, and repatriated wages of migrant workers.