ABSTRACT
This chapter provides evidence on the interaction between inward foreign direct investment (FDI) and regional economic development in China using 1994 data on 619 cities. It identifies three possible links between inward FDI and regional economic growth: distribution effects of regional economic growth on FDI, distribution effects of FDI on regional economic growth and simultaneous interactions between FDI and regional economic development. At the regional level, China is usually divided into eastern, central and western parts. The chapter presents the distribution of population, gross domestic product (GDP) and FDI in 1994 across these three regions. Relative to population and GDP, FDI is more unevenly distributed across Chinese regions, with almost all in the eastern part. The chapter also describes that GDP is determined by FDI, domestic capital, population, human capital, infrastructure quality and local economy structure. FDI positively and significantly contributes to local economic development and GDP is an important factor attracting FDI.
