Comparative Research On Factors Of FDI In Jiangsu And Guangdong Provinces

Nowadays, China has become the country that absorbs the most foreign direct investment (FDI) among the developing countries. However, the spatial distribution of FDI in China is highly uneven. Since the reform and opening up, the FDI amount in Jiangsu and Guangdong provinces of China has always been at the first and second place. As of 2009, the actually utilized FDI in China accumulated to＄924,646 billion, of which＄192.72 billion was utilized by Jiangsu Province and＄233.193 by Guangdong Province, accounting for 20.44% and 24.74 respectively. As one of the earliest areas to open up, Guangdong Province had a lot of advantages to attract FDI in the early and was the ones which absorbed the most FDI in China. With advantages of a new comer, FDI in Jiangsu Province is increasing. In 2003, Jiangsu actually utilized FDI of＄15.82 billion and surpassed Guangdong for the first time, ranking the first in China. Up to 2010, the FDI flow in Jiangsu Province has been the top place for eight consecutive years. Although the amount of FDI in Jiangsu and Guangdong Provinces is increasing, the speed of that is slowing down. Therefore, it is significant to compare the location advantages and determinants of FDI in Jiangsu and Guangdong Provinces, which can offer advice for Jiangsu and Guangdong to better absorb foreign investment and provide other areas with reference to improve the environment to attracting investment.Firstly, this paper compares the status of FDI in Jiangsu and Guangdong Provinces, finding that the absolute and relative amount and growth rate of FDI in Jiangsu Province has surpassed that in Guangdong. Moreover, the distribution of FDI out flowing from different countries and areas is balanced. On the other hand, the industrial structure of FDI in Guangdong is superior to that in Jiangsu. Then this paper analyzes the environments of attracting FDI in Jiangsu and Guangdong Provinces by comparing their representative location determinants. On that basis, it comes to a conclusion that Jiangsu has comparative advantages in labor costs, human capital and population density, while Guangdong has comparative advantages in infrastructure, economic openness, agglomeration economy, per capital income and the proportion. Besides, there is a narrow gap between the two provinces in term of levels of economic development and urbanization.However, not all the location advantages have significant effect on FDI inflow. Using data of 1993-2009 in Jiangsu and Guangdong, this paper makes an analysis through econometric method of stepwise regression model. The empirical results show that main factors affecting FDI in Jiangsu are average wage of workers and population density, while the main factors in Guangdong are agglomerative economy and urban per capita disposable income.Finally, this paper makes a summary and corresponding police recommendations in term of agglomeration effect, FDI in service industry, the quality of workers and domestic market demand.