This project addresses some of the policy questions that have risen over the last few decades as more and more countries seek to attract foreign direct investment (FDI) as a driver for their economic growth. It draws specifically on the Chinese experience. tt is well known that China has been very successful in attracting foreign direct investment. It is less well known that there are substantial internal differences in investment and growth, even within the coastal region.
The project seeks to provide some insight as to why some areas are more successful at attracting FDI than others. It looks beyond regional discrepancies or administrative or regulatory factors and adopts a more political approach that concentrates on the interests in the public and private sectors. It does this by comparing two local investment promotion agencies (IPA) in one of the most successful FDI attracting countries – the People's Republic of China .
The fact that China stands outside the ‘best practice' example for attracting FDI promoted by the World Bank (in areas such as securing property rights and positive governance indicators) adds more reason to seek answers beyond the current discourse. In comparing the experiences of two Chinese IPAs, this project draws upon some new concepts of transitional institutions and interest alignment, as well as a consideration of the importance of political context.
Apart from suggesting a shift in research approach, this project makes some policy recommendations. First, there are no technical or administrative fixes that are applicable across the board or easily or equally diffused, and that political context must be weighed into the equation. Second, there needs to be more focus on the merits of alternative institutional arrangements.
This project adds value to the literature on how public action can affect private investment by offering a unique window into the nuances of interaction both within the government and between the Chinese local government and international private investors. While the empirical findings are China-specific, the insights may be of general relevance given that country-internal differences in attracting investment are prevalent worldwide.
To access the research paper resulting from this project, please click here.
This project was carried out by Andrea Hampton. She holds an MA in ‘Governance and Development' from the Institute of Development Studies, University of Sussex (2005) and works now as a Public Finance Management Advisor on Trade Facilitation for the Crown Agents for Overseas Governments and Administration.