Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow

China is now the world's largest destination of foreign direct investment (FDI), despite assessments highlighting its institutional deficiencies. But this FDI inflow corresponds closely to predicted FDI flows into China from a model that predi...

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Main Authors:	Fan, Joseph P. H., Morck, Randall, Xu, Lixin Colin, Yeung, Bernard
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACTIONS AGENCY PROBLEMS BENCHMARK BENCHMARKS BUREAUCRACY CAPITAL FLOWS CAPITAL MARKET CAPITAL MARKETS CODES CONTRACTUAL ARRANGEMENTS CORRUPTION CROSS-COUNTRY ANALYSES CROSS-COUNTRY ANALYSIS CROSS-COUNTRY DATA DECISION MAKING DEMOCRACY DIRECT INVESTMENT INFLOW DISCLOSURE DOMESTIC FIRMS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC RESEARCH ECONOMIES OF SCALE ELECTION EMBEZZLEMENT ETHICAL STANDARDS EXCHANGE RATE EXPROPRIATION FDI FIXED INVESTMENT FOREIGN CAPITAL FOREIGN COMPANIES FOREIGN DIRECT INVESTMENT FOREIGN DIRECT INVESTMENTS FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OPERATION FOREIGN OPERATIONS GDP GDP PER CAPITA GLOBAL ECONOMY GROWTH POTENTIAL GROWTH RATE HOST COUNTRY INEFFICIENCY INFORMATION ASYMMETRY INVESTMENT PROJECTS INWARD FOREIGN DIRECT INVESTMENT LATIN AMERICAN LEGAL PROTECTION LEGAL SYSTEM MACROECONOMIC STABILITY MANUFACTURING SECTORS MARKET ACCESS MARKET FAILURE MASS MEDIA MONARCHY MONOPOLY MULTINATIONAL FIRMS NPV POLITICAL DEBATE POLITICAL ECONOMY POLITICAL SYSTEM PRIME MINISTER PRIVATE PROPERTY PROPERTY RIGHTS PUBLIC INVESTMENT PUBLIC OFFICIALS PUBLIC POLICY QUALITY OF LAWS RULE OF LAW RULINGS TRANSPARENCY TRINIDAD AND TOBAGO WAGES
Online Access:	http://documents.worldbank.org/curated/en/2007/04/7537759/good-government-draw-foreign-capital-explaining-chinas-exceptional-foreign-direct-investment-inflow http://hdl.handle.net/10986/7062

id	okr-10986-7062
recordtype	oai_dc
spelling	okr-10986-70622021-04-23T14:02:33Z Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow Fan, Joseph P. H. Morck, Randall Xu, Lixin Colin Yeung, Bernard ACTIONS AGENCY PROBLEMS BENCHMARK BENCHMARKS BUREAUCRACY CAPITAL FLOWS CAPITAL MARKET CAPITAL MARKETS CODES CONTRACTUAL ARRANGEMENTS CORRUPTION CROSS-COUNTRY ANALYSES CROSS-COUNTRY ANALYSIS CROSS-COUNTRY DATA DECISION MAKING DEMOCRACY DIRECT INVESTMENT INFLOW DISCLOSURE DOMESTIC FIRMS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC RESEARCH ECONOMIES OF SCALE ELECTION EMBEZZLEMENT ETHICAL STANDARDS EXCHANGE RATE EXPROPRIATION FDI FIXED INVESTMENT FOREIGN CAPITAL FOREIGN COMPANIES FOREIGN DIRECT INVESTMENT FOREIGN DIRECT INVESTMENTS FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OPERATION FOREIGN OPERATIONS GDP GDP PER CAPITA GLOBAL ECONOMY GROWTH POTENTIAL GROWTH RATE HOST COUNTRY INEFFICIENCY INFORMATION ASYMMETRY INVESTMENT PROJECTS INWARD FOREIGN DIRECT INVESTMENT LATIN AMERICAN LEGAL PROTECTION LEGAL SYSTEM MACROECONOMIC STABILITY MANUFACTURING SECTORS MARKET ACCESS MARKET FAILURE MASS MEDIA MONARCHY MONOPOLY MULTINATIONAL FIRMS NPV POLITICAL DEBATE POLITICAL ECONOMY POLITICAL SYSTEM PRIME MINISTER PRIVATE PROPERTY PROPERTY RIGHTS PUBLIC INVESTMENT PUBLIC OFFICIALS PUBLIC POLICY QUALITY OF LAWS RULE OF LAW RULINGS TRANSPARENCY TRINIDAD AND TOBAGO WAGES China is now the world's largest destination of foreign direct investment (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. The authors conclude that Ockham's razor disfavors the last. They also note that FDI may be elevated because Chinese institutions protect foreign firms better than domestic ones. 2012-06-04T20:54:56Z 2012-06-04T20:54:56Z 2007-04 http://documents.worldbank.org/curated/en/2007/04/7537759/good-government-draw-foreign-capital-explaining-chinas-exceptional-foreign-direct-investment-inflow http://hdl.handle.net/10986/7062 English Policy Research Working Paper; No. 4206 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific China
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACTIONS AGENCY PROBLEMS BENCHMARK BENCHMARKS BUREAUCRACY CAPITAL FLOWS CAPITAL MARKET CAPITAL MARKETS CODES CONTRACTUAL ARRANGEMENTS CORRUPTION CROSS-COUNTRY ANALYSES CROSS-COUNTRY ANALYSIS CROSS-COUNTRY DATA DECISION MAKING DEMOCRACY DIRECT INVESTMENT INFLOW DISCLOSURE DOMESTIC FIRMS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC RESEARCH ECONOMIES OF SCALE ELECTION EMBEZZLEMENT ETHICAL STANDARDS EXCHANGE RATE EXPROPRIATION FDI FIXED INVESTMENT FOREIGN CAPITAL FOREIGN COMPANIES FOREIGN DIRECT INVESTMENT FOREIGN DIRECT INVESTMENTS FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OPERATION FOREIGN OPERATIONS GDP GDP PER CAPITA GLOBAL ECONOMY GROWTH POTENTIAL GROWTH RATE HOST COUNTRY INEFFICIENCY INFORMATION ASYMMETRY INVESTMENT PROJECTS INWARD FOREIGN DIRECT INVESTMENT LATIN AMERICAN LEGAL PROTECTION LEGAL SYSTEM MACROECONOMIC STABILITY MANUFACTURING SECTORS MARKET ACCESS MARKET FAILURE MASS MEDIA MONARCHY MONOPOLY MULTINATIONAL FIRMS NPV POLITICAL DEBATE POLITICAL ECONOMY POLITICAL SYSTEM PRIME MINISTER PRIVATE PROPERTY PROPERTY RIGHTS PUBLIC INVESTMENT PUBLIC OFFICIALS PUBLIC POLICY QUALITY OF LAWS RULE OF LAW RULINGS TRANSPARENCY TRINIDAD AND TOBAGO WAGES
spellingShingle	ACTIONS AGENCY PROBLEMS BENCHMARK BENCHMARKS BUREAUCRACY CAPITAL FLOWS CAPITAL MARKET CAPITAL MARKETS CODES CONTRACTUAL ARRANGEMENTS CORRUPTION CROSS-COUNTRY ANALYSES CROSS-COUNTRY ANALYSIS CROSS-COUNTRY DATA DECISION MAKING DEMOCRACY DIRECT INVESTMENT INFLOW DISCLOSURE DOMESTIC FIRMS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC RESEARCH ECONOMIES OF SCALE ELECTION EMBEZZLEMENT ETHICAL STANDARDS EXCHANGE RATE EXPROPRIATION FDI FIXED INVESTMENT FOREIGN CAPITAL FOREIGN COMPANIES FOREIGN DIRECT INVESTMENT FOREIGN DIRECT INVESTMENTS FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OPERATION FOREIGN OPERATIONS GDP GDP PER CAPITA GLOBAL ECONOMY GROWTH POTENTIAL GROWTH RATE HOST COUNTRY INEFFICIENCY INFORMATION ASYMMETRY INVESTMENT PROJECTS INWARD FOREIGN DIRECT INVESTMENT LATIN AMERICAN LEGAL PROTECTION LEGAL SYSTEM MACROECONOMIC STABILITY MANUFACTURING SECTORS MARKET ACCESS MARKET FAILURE MASS MEDIA MONARCHY MONOPOLY MULTINATIONAL FIRMS NPV POLITICAL DEBATE POLITICAL ECONOMY POLITICAL SYSTEM PRIME MINISTER PRIVATE PROPERTY PROPERTY RIGHTS PUBLIC INVESTMENT PUBLIC OFFICIALS PUBLIC POLICY QUALITY OF LAWS RULE OF LAW RULINGS TRANSPARENCY TRINIDAD AND TOBAGO WAGES Fan, Joseph P. H. Morck, Randall Xu, Lixin Colin Yeung, Bernard Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow
geographic_facet	East Asia and Pacific China
relation	Policy Research Working Paper; No. 4206
description	China is now the world's largest destination of foreign direct investment (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. The authors conclude that Ockham's razor disfavors the last. They also note that FDI may be elevated because Chinese institutions protect foreign firms better than domestic ones.
format	Publications & Research :: Policy Research Working Paper
author	Fan, Joseph P. H. Morck, Randall Xu, Lixin Colin Yeung, Bernard
author_facet	Fan, Joseph P. H. Morck, Randall Xu, Lixin Colin Yeung, Bernard
author_sort	Fan, Joseph P. H.
title	Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow
title_short	Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow
title_full	Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow
title_fullStr	Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow
title_full_unstemmed	Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow
title_sort	does "good government" draw foreign capital? explaining china's exceptional foreign direct investment inflow
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2007/04/7537759/good-government-draw-foreign-capital-explaining-chinas-exceptional-foreign-direct-investment-inflow http://hdl.handle.net/10986/7062
_version_	1764401804833980416

Does "Good Government" Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow

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