It is widely acknowledged that the actual magnitude of China's reported FDI flows is subject to uncertainty. Reported flows are thought to be dver-estimated due to over-valuation of capital equipment contributed to joint ventures by foreign investors (the value of which is translated into equity investment and recorded as FDI) and because of "roundtripping" through Hong Kong (and Taiwan, China, to a lesser extent) in part to benefit from preferential tax treatment accorded to foreigners. The World Bank has estimated such factors inflated China's 1994 FDI inflows by about 37 percent.' With recent improvements in Chinese FDI statistical methodologies and reforms of FDI tax preferences (see below), the magnitude of this problem should be reduced. Inasmuch as this study is concerned with the distribution of FDI _within_ China, this problem should not materially affect our analysis.

# m. **THE** GEOGRAPHICAL DISTRIBUTION OF **FDI** IN **CHINA**

Virtually no study on FDI in China has failed to point out the uneven geographical distribution of foreign capital within the country. The concentration of FDI flows in the east and southeast regions is seen clearly from Table 5. The twelve coastal provinces attracted between 87 and 93 percent of total FDI inflows to China during the 1985-92 period, and their share of FDI has remained above 90 percent since 1989. Among coastal regions, Fujian, Shanghai, Jiangsu and Guangdong have all been hosts to significant amounts of FDI. Guangdong has consistently been the leading coastal destination, and in recent years, the gap between FDI flows into Guangdong and all other provinces has been enlarging.

**Table 5: Chinese FDI Inflows by Region $US Millions**

||1985|1987|1989|1990|1991|1992|
|---|---|---|---|---|---|---|
|Coastal<br>|1.181.42<br>|1,578.44<br>|3,107.03<br>|3,201.33|4,092.21|10,046.50|
|**Ouangdong**<br>|651.31<br>|736.87<br>|1,252.06<br>|1,582.31|1,942.88|3,701.11|
|Fujian<br>|118.60<br>|55.35<br>|348.03<br>|348.89|471.16|1,423.64|
|Jiangsu<br>|33.47<br>|86.35<br>|126.93<br>|133.97|219.22|1,463.24|
|Beijing<br>|88.82|105.79|320.16|278.95|244.95|349.85|
|Shanghai<br>|107.54<br>|214.01|422.12|174.01|145.19|493.61|
|Shandong<br>|35.63<br>|64.97<br>|163.33|185.70|216.39|1,003.42|
|Liaoning<br>|24.58|90.84|126.14|257.31|362.39|516.42|
|Hainan<br>|||94.97|103.02|176.72|452.55|
|Tianjin<br>|55.87<br>|133.13<br>|31.42<br>|36.93|132.61|107.78|
|Zhejiang<br>|26.63|35.76|53.96|49.14|92.29|239.78|
|Guangxi<br>|30.73|_45.05_|53.00|35.63|31.85|182.01|
|Hebei|8.24|10.32|43.73|44.47|56.56|113.09|
|Inland|136.09|203.75|330.30|234.82|333.71|957.52|
|Shaanxi<br>|_15.55_<br>|72.88|97.19|47.31|31.76|45.53|
|Hubei<br>|8.00|25.99|28.61|31.76|46.64|203.13|
|Sichuan|28.72|24.27|13.11|24.37|80.91|112.14|
|Heilongjiang|3.95|14.04|57.36|28.36|20.85|72.17|
|Hunan<br>|27.28<br>|2.86|23.28|14.15|25.43|132.71|
|Henan<br>|8.27|13.53|46.06|11.36|37.99|53.16|
|**Jilin**|4.87|7.37|9.93|17.60|31.64|75.34|
|Jiangxi<br>|10.49|5.35|9.23|7.51|19.49|99.72|
|Anhui|3.03|3.23|8.75|13.54|10.67|54.66|
|Guizhou|9.87||12.76|10.58|14.09|19.79|
|Shanxi|0.52|4.90|9.81|3.40|3.80|53.84|
|Yunnan<br>|1.63|6.33|7.87|7.38|3.51|28.75|
|Xinjiang<br>|10.91|17.70|0.88|5.37|0.22||
|Inner Mongolia|2.00|5.06|4.35|10.64|1.66|5.20|
|Gansu|0.57|0.21|1.11|1.24|4.87|0.35|
|Qinghai|0.15|||||0.68|
|**Ningxia**<br>|0.28|0.03||0.25|0.18|0.35|
|Tibet|||||||
|Total|1,317.51|1,782.19|3,437.33|3,436.15|4,425.92|11,004.02|

**_Sourc:_** _China_ **_Statistical_** _Yearbook_

> 7 World Debt Tables (1996), p.94.

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