Does "good government" draw foreign capital?
Subtitle: explaining China's exceptional foreign direct investment inflow
By: Joseph P. H. Fan, ... [et al.].
Series: World Bank policy research working paper -- 4206; Policy research working papers -- 4206
Publisher: World Bank, Development Research Group, Finance and Private Sector Development Team
Published: 2007
Place of publication: Washington, D.C.]
Language: eng
Number of pages: 39
Subjects: Foreign Investments; Capital investments
Description: China is now the world's largest destination of FDI, despite assessments highlighting its institutional deficiencies. But this FDI inflow corresponds closely to predicted FDI flows into China from a model that predicts FDI inflow based on government quality indicators and controls and is estimated across a sample of other weak-institution countries. The only real discrepancy is that, if government quality is measured by constraints on executive power, China receives somewhat more FDI than the model predicts. This might reflect an underestimation of the strength of these constraints in China, a unique institutional setting for FDI operations, FDI based on expected future institutional improvements, or a unique Chinese model of development. We conclude that Ockham's razor disfavors the last. We also note that FDI may be elevated because Chinese institutions protected foreign firms better than domestic ones.
Notes: "April 2007"--Cover.

Includes bibliographical references (p. 28-30).

Also available in an electronic version.