Panel Data Analysis On Regional Determinants Of Foreign Direct Investment Inflow In Mainland China

China's economic reform has attracted worldwide attention. With getting into the WTO, China has gradually opened up to the rest of the world. Meanwhile, many countries see attracting foreign direct investment (FDI) as an important element in their strategy for economic development because FDI is widely regarded as an amalgamation of capital, technology, market, and management. Since these flows of FDI are playing and will likely continue to play a key role in the integration of China into the world economy, this dissertation focuses on the factors affecting the level of FDI across provinces in China from 1994 to 2003 and the study differentiate from other similar studies on China's FDI by looking at possible changes in importance of determining factors through time.After introduction the situation of FDI in China and review the literature about it, analysis is present on how the locational choice of foreign direct investment (FDI) is influenced by regional characteristics in mainland China. Empirical testing is conducted by using panel data with pooled regression model, fixed effect model and random effect model. The results show that market demand and market size, agglomeration infrastructure, degree of industrialization, level of foreign investment and degree of openness, regression finds a positive relationship with FDI, while labor cost is found to be a negative determinant. It also indicates that existing FDI does not attract further inflow of FDI fast enough as before.Several policy suggestions are provided to the government to improve attracting more FDI to China. Economic growth, higher productivity and the opening up of new sectors to foreign investors can be viewed as a possible mean for attracting FDI inflow across mainland China.