Foreign Direct Investment and Unequal Regional Economic Growth in China

Growth in export is here seen as a direct result of DFI. “Export” is thus endogenous in
the model, and not a direct (and as normal exogenous) source of growth. This point of
view is supported by the data, see the appendix.

3. DATA

The purpose of the empirical analysis is to show the relations between regional
income development and regional foreign direct investment. The data used in the
analysis are the regional data published by the China Statistical Yearbook (1989-
1997). The data for GDP and GDP per capita measured in yuan are adjusted for
inflation and are expressed in 1990 price deflated by consumer price indices for
China. The data for “direct foreign investment and other” measured in US dollar are
deflated by US consumer price index. Both deflators are published by the IMF:
“International Financial Statistics Yearbook, 1997”.

The model formulated for estimation is based on the following development of data

GDP - Gross Domestic Product for the region, measured in yuan

POP - Population of the region

DFI - Direct Foreign Investment in the region, measured in dollar

DFL - Deflator - Consumer price index for China

DFLUS - Deflator - Consumer price index for USA

Percentage change in fixed price per capita income (growth rate):

DFPCY = (FPCY - FPCY(-1))/(.5*(FPCY + FPCY(-1)))

Change in direct foreign investment in percentage of fixed price per capita income is
defined as:

DFDFIPC = (FDFIPC - FDFIPC(-1))/(.5*(FPCY + FPCY(-1)))

In order to facilitate the intuitive understanding of the equations we will call

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