Chapter 3 International Integration and Uneven Development: An Enquiry into the Spatial Distribution of Foreign Firms in China

Purpose The objective of this chapter is to provide a first assessment on the evolution of spatial distribution of foreign firms in China. Methodology/approach We examine the overall changes in the location of foreign firms in China over the period 1999–2009. Then, we distinguish two time periods, 1998–2001 and 2002–2009 so as to analyze whether foreign firms’ agglomeration across regions has changed significantly after the China’s entry into the WTO (2001) and the first launch of the Chinese government policies to develop western internal areas. Findings Our analysis suggests that foreign-invested enterprises (FIEs) with higher foreign capital shares are more geographically clustered in coastal regions than other enterprises with lower foreign capital shares. This group with the highest intensity of foreign involvement in firm capital also experienced the most relevant changes over the decade of our analysis becoming more localized between the core-periphery divide (coastal provinces and the rest of mainland China). Research limitations The main limitation refers to poor data availability, data matching problems, and measurement errors in the database used, as highlighted by Nie, Jiang, and Yang (2012). Practical implications A general analysis of location patterns and the role of public policies may inform foreign companies in their entry strategy in the Chinese market. Originality/value Very few studies have explored location patterns with detailed geographical data and, at the same time, with data disaggregated by foreign ownership shares.