| The astonishing growth of foreign direct investment (FDI) flows into China has been one of the most spectacular events in the country' s economic reform and open door process initiated in the late 1970s. This is especially true when that process entered into the 1990s. Between 1979 and 1998, China received over US{dollar}200 billion in FDI. Recent inflows account for close to 40 percent of combined flows of FDI to all developing countries, making China the largest FDI recipient among all developing countries and second only to the United States. What explains this extraordinary phenomenon?; Booming of capital markets--where current costs are incurred for future benefits and private investors are thus vulnerable to opportunistic defections--logically requires the presence and improvement of non-market institutions for the protection of private properties and the reduction of transaction costs. Applying the logic of neo-institutionalism, the present thesis goes beyond purely economic and cultural factors in examining the effects of the formal institution (defined as official policies and legislation, municipal and international) of China's FDI regulatory regimes during the reform years. It argues that the gradual yet steady improvement of formal institutional arrangements to facilitate capital flows, albeit imperfect, has had systematic effects on the variant patterns of FDI flows in China.; To demonstrate institutional effects on investment behavior, the thesis employs both qualitative and quantitative methodologies. Proceeding first from a simple juxtaposition of the changing patterns of FDI flows with the evolution of China's FDI regulatory regimes put in international perspectives, it will then, in part by way of regression analyses, validate institutional claims, while controlling for economic and cultural factors. |
