The Impact of Foreign Direct Investment on Regional Economic Growth and Income Convergence a Panel Data Study in China

Abstract

Previous studies regarding the impact of FDI on regional economic growth and income convergence in China have mixed results and are far from being conclusive due to different datasets and methodologies used. This study thus used a panel data from China Statistical Yearbook covering all 31 Chinese regions to better understand the impact of FDI on regional economic growth and income convergence in China. For the period between 1999 and 2017, it found that neither FDI inflow nor labor has a statistically significant impact on the provincial economic growth. However, domestic investment in fixed assets does have a statistically significant impact on the provincial economic growth. Moreover, there is no absolute ? income convergence among regions. Nonetheless, there is a conditional ? income convergence (a moderate convergence speed of 7.49%) after controlling for all other growth factors: domestic investment in fixed assets, population growth rate, FDI inflow, export, and higher education enrollment.