The determinants of disparities in inward FDI flows to the three macro-regions of China

This study investigates the determinants of disparities in inward foreign direct investment (FDI) among the three macro-regions of China. A pooled ordinary least squares model (POLS) is employed using a panel dataset at the provincial level. Variations in economic openness (government's preferential policies) and industrial and economic development in terms of market size, human resources, agglomeration and infrastructure are the prime causes of the uneven regional distribution of FDI, which further widens income and economic development inequalities among the three macro-regions. To reduce the degree of regional disparity, the government should offer more extensive preferential policies attracting FDI, especially in energy, transport, resources, high and new technology industries, into the inland regions and increase government investment in education and infrastructure in these areas.