Do Inland Provinces Benefit from Coastal Foreign Direct Investment in China?

Abstract

Foreign direct investment (FDI) in China is heavily concentrated in the coastal regions. Do inland provinces benefit from coastal FDI? We use a provincial-level panel dataset and employ the fixed-effects instrumental variables regression technique to investigate the interregional spillovers from coastal FDI to inland provinces. The study finds that, on average, coastal FDI has a negative impact on the economic growth of inland provinces. In addition, depending on the different trade activities engaged in (i.e. whether processing trade or ordinary trade), coastal FDI has different impacts on the economic growth of inland provinces.