Hostname: page-component-848d4c4894-ndmmz Total loading time: 0 Render date: 2024-06-03T17:37:42.405Z Has data issue: false hasContentIssue false
  • English
  • Français

Ownership Biases and FDI in China: Evidence from Two Provinces

Published online by Cambridge University Press:  20 January 2017

Yasheng Huang
Yasheng Huang*
Affiliation:
MIT Sloan School of Management
Get access Rights & Permissions [Opens in a new window]

Abstract

Jiangsu and Zhejiang are of two of China's most prosperous and dynamic provinces. This paper first presents a factual account of two empirical phenomena: 1) FDI has played a more substantial role in the economic development of Jiangsu than in Zhejiang, and 2) ownership biases against domestic private firms in Jiangsu were more substantial than in Zhejiang. The paper hypothesizes that there is a connection between these two empirical phenomena. Specifically, ownership biases against domestic private firms increase preferences for FDI because FDI provides a measure of relative property rights security. Thus a biased domestic private firm has an incentive to move its assets and/or future growth opportunities to the foreign sector. The paper uses two private-sector surveys—one conducted in 1993 and the other in 2002—to provide an empirical test of this hypothesis. Our analysis shows, controlling for a variety of firm-level attributes and industry and regional characteristics, those private firms which perceive ownership biases to be more severe are more likely to form joint ventures with foreign firms.

Keywords

ChinaFDImultinational corporations
Type
Article
Information
Business and Politics , Volume 9 , Issue 1 , April 2007 , pp. 1 - 45
Copyright
Copyright © V.K. Aggarwal 2007 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aggarwal, Raj, and Weekly, James K. 1982. “Foreign Operations of Third World Multinationals: A Literature Review and Analysis of Indian Companies.” Journal of Developing Areas 17: 13–29.Google Scholar
Bai, Chong-En, Li, David D., Qian, Yingyi, and Wang, Yijiang. 1999. “Anonymous Banking and Financial Repression: How does China's Reform Limit Government Predation Without Reducing its Revenue?”Google Scholar
Brandt, Loren, Li, Hongbin, and Roberts, Joanne. 2005. “Banks and Enterprise Privatization in China.” Journal of Law, Economics and Organization 21 (2): 524–46.Google Scholar
Byrd, William A., and Lin, Qingsong. 1990. “China's Rural Industry: An Introduction.” In China's Rural Industry, ed. Byrd, W. A. and Qingsong, L. New York: Oxford University Press.Google Scholar
Caves, Richard E. 1996. Multinational Enterprise and Economic Analysis. 2 ed. Cambridge: Cambridge University Press.Google Scholar
Collier, Paul, and Dollar, David. 2001. “Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet International Development Goals.” World Development 29 (11): 1787–802.Google Scholar
Dollar, David. 2005. “Globalization, Poverty, and Inequality since 1980.” World Bank Research Observer 20 (2): 145–75.Google Scholar
Xiaotong, Fei. 1986. “Xiao Shangpin Dashichang [Small Commodities, Big Markets].” Liaowang [Outlook] (22).Google Scholar
Garnaut, Ross, Song, Ligang, Tenev, Stoyan, and Yao, Yang. 2005. China's Ownership Transformation. Washington, DC: International Finance Corporation.Google Scholar
Hausmann, Ricardo, Pritchett, Lant, and Rodrik, Dani. 2004. “Growth Accelerations.” NBER Working Paper No. 10566.Google Scholar
Hsing, You-tien. 1993. Transnational Networks of Taiwanese Small Business and Chinese Local Governments: A New Pattern of Foreign Direct Investment. PhD dissertation, Department of City and Regional Planning, University of California at Berkeley.Google Scholar
Huang, Yasheng. 2003. Selling China: Foreign Direct Investment During the Reform Era. New York: Cambridge University Press.Google Scholar
Huang, Yasheng and Du, Wenhua. 2004. “A Tale of Two Provinces: The Institutional Environment and Foreign Ownership in China.” Cambridge, MA: MIT Sloan School of Management.Google Scholar
Hymer, Stephen H. 1976. The International Operations of National Firms. Cambridge: MIT Press.Google Scholar
Jin, Hehui, and Qian, Yingyi. 1998. “Public vs. Private Ownership of Firms: Evidence from Rural China.” Quarterly Journal of Economics 113 (3): 773–808.Google Scholar
Kueh, Y. Y. 1992. “Foreign Investment and Economic Change in China.” China Quarterly (131):637–90.Google Scholar
Lardy, Nicholas R. 1998. China's Unfinished Economic Revolution. Washington, DC: Brookings Institution.Google Scholar
Lardy, Nicholas R. 1992. Foreign Trade and Economic Reform in China, 1978–1990. New York: Cambridge University Press Google Scholar
Lecraw, David. 1977. “Direct Investment by Firms from Less Developed Countries.” Oxford Economic Papers, 442–57.Google Scholar
Luo, Xiaopeng. 1990. “Ownership and Status Stratification.” In China's Rural Industry, ed. Byrd, W. A. and Lin, Q. New York: Oxford University Press.Google Scholar
McGregor, Richard. 2006. “China's Poorest Worse Off After Boom but the Rich Get Richer.” Financial Times, November 21.Google Scholar
McGregor, Richard, and Sun, Yu. 2006. “Challenging Change: Why an Ever Fiercer Battle Hinders China's March to the Markets.” Financial Times, February 28.Google Scholar
Ministry of Foreign Trade and Economic Relations. 1996. Zhongguo Duiwai Jingji Maoyi Nianjian 1996/1997 [Statistical Yearbook of Foreign Economy and Trade, 1996/1997]. Beijing: Zhongguo Jingji Chubanshe.Google Scholar
National Bureau of Statistics of China. 2002. China Statistical Yearbook 2002. Beijing: China Statistics Press.Google Scholar
Office of Third Industrial Census. 1997. Zhonghua Renmin Gongheguo 1995 Nian Disanci Quanguo Pucha Ziliao Huibian [The Data of the Third National Industrial Census of the People's Republic of China in 1995]. Beijing: Zhongguo Tongji Chubanshe.Google Scholar
Oi, Jean C. 1999. Rural China Takes Off. Berkeley: University of California Press.Google Scholar
Park, Albert, and Shen, Minggao. 2000. “Joint Liability Lending and the Rise and Fall of China's Township and Village Enterprises.” Ann Arbor: Department of Economics, University of Michigan.Google Scholar
Ravallion, Martin, and Chen, Shaohua. 2004. “China's (Uneven) Progress Against Poverty.” In World Bank Policy Research Working Paper No. 3408. Washington, DC: World Bank.Google Scholar
Sachs, Jeffrey D., Warner, Andrew, Aslund, Anders, and Fischer, Stanley. 1995. “Economic Reform and the Process of Global Integration.” Brookings Papers on Economic Activity (1):1–95.Google Scholar
State Statistical Bureau. 1989. Yanhai Jingji Kaifangqu Jingji Yanjiu he Tongji Ziliao [Coastal Open Zones: Economic Research and Statistical Information]. Beijing: Zhongguo Tongji Chubanshe.Google Scholar
State Statistical Bureau. 1990 Quanguo Gesheng, Zizhiqu, Zhixiashi Lishi Tongji Ziliao Huibian [Collection of Historical Data of Chinese Provinces, Autonomous Regions, and Directly- Administered Municipalities] Beijing Zhongguo tongji chubanshe Google Scholar
State Statistical Bureau. 1996. China Regional Economy: A Profile of 17 Years of Reform and Opening-up. Beijing: Zhongguo Tongji Chubanshe.Google Scholar
Svejnar, Jan, and Woo, Josephine. 1990. “Development Patterns in Four Countries.” In China's Rural Industry, ed. Byrd, W. A. and Qingsong, L. New York: Oxford University Press.Google Scholar
Tsai, Kellee S. 2002. Back Alley Banking: Private entrepreneurs in China. Ithaca: Cornell University Press.Google Scholar
Wei, Shang-Jin. 1996. “Foreign Direct Investment in China: Sources and Consequences.” In Financial Deregulation and Integration in East Asia, ed. Ito, T. and Krueger, A. Chicago: University of Chicago Press.Google Scholar
Wells, Louis T. Jr. 1993. “Mobile Exporters: New Foreign Investors in East Asia.” In Foreign Direct Investment, ed. Froot, K. A. Chicago: University of Chicago Press.Google Scholar
Woodruff, Christopher. 1998. “Contract Enforcement and Trade Liberalization in Mexico's Footwear Industry.” World Development 26 (6): 979–91.Google Scholar
Houyi, Zhang, and Lizhi, Ming. 1999. Zhongguo Siying Qiye Fazhan Baogao (1978–1998) [Report on Development of China's Private Enterprises (1978–1998)]. Beijing: Shehui Kexue Wenxian Chubanshe.Google Scholar