The logic of lower production costs leading to more overseas investment prevails. At the macroeconomic level, the activities of multinational corporations, including direct foreign investment, change factor endowments in trade partner countries which underlie international trade. This article has investigated the impact of DFI on the foreign trade of China. It has found that in general, DFI is trade-creating in the case of China, and supports the Kojima hypothesis that foreign investments which are concentrated in the host country's comparatively advantaged industries tend to promote trade. As found from the empirical study, DFI has played an important role in Chinese export expansion, and has acted as a catalyst to economic growth and trade expansion in the past 18 years.
Economic challenges make for political repercussions in Greater China.
On the mainland, reform slows and dissent is no longer tolerated, cross-strait relations are volatile, while Hong Kong is not the boon once expected. The loss of foreign investment and exports cost the country 2 to 3 percent of overall growth in 1998. China's response was a Keynesian program of huge infrastructure spending, to be financed by massive state investments, bond issues, and bank loans. Access to housing of sufficient space and quality has been a central element in social stratification in urban China. We examine the sources of housing inequality in 1993 in Shanghai and Tianjin, when a market reform process had been underway in the national economy for nearly fifteen years.