WTO accession and foreign direct investment in China

Purpose – The purpose of this paper is to attempt to investigate the location determinants of foreign direct investment (FDI) and examine the impact of WTO accession. Design/methodology/approach – Based on an 11-year panel dataset on FDI and urban characteristics across Chinese cities, the paper employs a random effect panel data model to study the impact of WTO accession on FDI. Findings – The estimation results provide supportive evidence on WTO accession effects on FDI location. The importance of agglomeration economies increases, while the influence of market size and government preferential policies has decreased after WTO accession. Cheap labor plays an increasingly important role, but labor quality and roadway transport conditions lose their significance. Originality/value – This study contributes to the existing literature by identifying the WTO accession effects on FDI location choices in a transitional economy.