Inter-cities Competition For Foreign Direct Investment: Policy Environment, Economy Environment And Performance

Since the reform policies commenced in 1978, foreign direct investment in China has increased rapidly. In 2002, China, exceeded the United State first time, became the country who attracted the most foreign direct investment all over the world. Though the mount of foreign direct investment in China is noticeable and the rate of growth is striking, an important problem is that the distribution of realized FDI among China's regions is markedly asymmetrical and that foreign investors have favored the accessible eastern region, especially the traditional industrial centers among coastal cities and the Pearl Delta and Yangtze Delta. Then, another obvious phenomena is that regional governments offer a wide variety of programs to attracting foreign investment, with tax holidays and other fiscal incentives being the most common type, and range from reducing the site (land) use fees to the reduction and exemption of enterprise income tax and profit remittance taxes. The choice of a favorable location is important to the success of FDI. In this way, how can regional governments ultimately influence the geography of FDI location in mainland China? Using Correlate analysis, Factor analysis and Regression analysis, the author hopes looking for the reason resulting in the differentiations and finally brings out some reciprocal suggestions for the East China and further for the cities in Middle China and West China. The data comes from 83 cities located in 12 eastern provinces in 2002.(1) The primary factors influencing FDI spatial differentiations are the comprehensive invest environment and the geography location. The comprehensive invest environment consists of high quality of labor, basic, industry cluster, investment strength and market.(2) In order to improve the effectiveness in attracting foreign direct investment, we give following suggestions: firstly, accelerate the growth of economy and take the new-industrialize route; second, provide and improve the establishment and infrastructure for supporting economy development, and utilize actively the respective cluster effects of industry and FDI; third, improve the dependency trade and expand exportation business; fourth, reinforce the education investment, enhance the quality of labor and the ability of innovation.