Good governance and FDI in China

Some interesting research looking into China's success in attracing FDI inflows. This is an area of research where there is plenty more to do.

Below are 3 other China related papers from the World Bank Policy Research Working paper series. These papers are free to download from the SSRN website (see links below).

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"Does 'Good Government' Draw Foreign Capital? Explaining China's Exceptional Foreign Direct Investment Inflow"
World Bank Policy Research Working Paper No. 4206


Author: JOSEPH P.H. FAN
Chinese University of Hong Kong - School of
Accountancy
Email: pjfan@cuhk.edu.hk
Auth-Page: http://ssrn.com/author=28125

Contact: RANDALL MORCK
University of Alberta - Department of Finance and
Management Science, National Bureau of Economic
Research (NBER)
Email: randall.morck@ualberta.ca
Auth-Page: http://ssrn.com/author=71368

Co-Author: LIXIN COLIN XU
World Bank - Development Research Group (DECRG),
Peking University - Guang Hua School of Management
Email: LXU1@worldbank.org
Auth-Page: http://ssrn.com/author=122631

Co-Author: BERNARD YIN YEUNG
New York University - Department of Economics
Email: byeung@stern.nyu.edu
Auth-Page: http://ssrn.com/author=71371

Full Text: http://ssrn.com/abstract=980824

ABSTRACT: 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.
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Other papers that may be of interest are:

"Formal Finance and Trade Credit During China's Transition"
ROBERT CULL
World Bank - Development Research Group (DECRG)
LIXIN COLIN XU
World Bank - Development Research Group (DECRG), Peking
University - Guang Hua School of Management
TIAN ZHU
Hong Kong University of Science & Technology - Division
of Social Science


"Local Elections and Consumption Insurance: Evidence from Chinese Villages"
LI GAN
Texas A&M University - Department of Economics, National
Bureau of Economic Research (NBER)
LIXIN COLIN XU
World Bank - Development Research Group (DECRG), Peking
University - Guang Hua School of Management
YANG YAO
Peking University - CCER