ABSTRACT
This chapter investigates the impact of direct foreign investment (DFI) on Chinese economic development from 1979 to 1996. The neoclassical failure to explain and predict how, where and why DFI occurs and to highlight the social and economic consequences of DFI has led to the development of new explanations of international investment. The country-specific factors not only determine where multinational corporations make direct investment, but can also be utilized to account for the different types of DFI such as domestic-market-oriented investment and export-oriented investment. Kiyoshi Kojima argues that DFI by large and oligopolistic firms in high technology industries is 'anti-trade-oriented' and works against the structure of comparative advantage. DFI from one country may be distributed in a variety of industries, including advantaged and disadvantaged industries. DFI may contribute to the economic growth of the host country through positively affecting aggregate demand. However, the relationship between DFI and domestic investment by the host country is inconclusive.
