Does foreign direct investment crowd in or crowd out private domestic investment in China? The effect of entry mode
Using quarterly data spanning from 1994Q1 to 2014Q4, we find a neutral relationship between foreign direct investment (FDI) and domestic investment in China. However, when we consider the entry mode chosen by foreign investors, we find that whilst equity joint venture (EJV) crowds in domestic investment, wholly foreign-funded enterprise (WFFE) crowds it out. Our results remain robust under alternative estimators and across different time periods. Based on these results, we argue that the Chinese government needs to actively promote the formation of EJV and uses it as the catalyst for industrial upgrading in the economy.
Gender segregation in the causal effect of foreign direct investment on educational attainment: the Chinese experience
We examine the causal effect of foreign direct investment (FDI) on educational attainment through the lens of gender segregation in China. Using a comprehensive dataset for the 1985-2014 period and controlling for endogeneity, we find that a more prominent FDI presence causes higher educational attainment, particularly for women. Moreover, we show that this gender-segregated causal effect remains robust to different estimators, measurements and specifications. Overall, we uncover an important social externality of FDI that has never been explored systematically in the literature; namely, FDI generates positive spillovers on female educational attainment in its host country.
Estimating the long-run crude oil demand function of China: Some new evidence and policy options
China's remarkable economic progress over the past three decades has been complemented by massive energy consumption. Although coal has long been the primary energy source, the rise in crude oil use has been viewed as more contentious, because a large portion of crude oil is imported, whereas the economy is mostly self-sufficient in coal. We examine the role of R&D effort and self-sufficiency on China's oil import function from 1980 to 2020. Using the autoregressive distributed lag model, we find that the R&D effort raises oil imports in the long run. However, we find oil imports to be independent from self-sufficiency in the long run. We also find that China's accession to the World Trade Organization has significantly changed the cointegrating relationship in the oil import function. Our results suggest that the government should continue to incentivize energy-saving measures and fund research projects on renewable energy sources. Furthermore, deregulation in the oil market is quintessential to energy security and stable growth in the long run.
Schooling returns for migrant workers in China: Estimations from the perspective of the institutional environment in a rural setting
We examine schooling returns for migrant workers in China based on the 2009 Rural-Urban Migration in China (RUMiC) survey. Using a novel instrumental variable (IV) set based on the institutional environment unique to rural China, we find the point estimates of returns to lie within the range of 7.8% - 10.7% for each additional year of schooling. Whilst our estimates are slightly higher than those reported for this cohort of workers in the literature, they are significantly lower than those enjoyed urban dwellers. Furthermore, we identify a wider gap in schooling returns between male (14.7%) and female (8.5%) migrant workers than the comparable gap for urban dwellers. Our results provide another line of evidence supporting a segmented labor market in urban China and remain robust to different estimators and under various IV restrictions. We suggest that improving the education system in the rural areas and eliminating the gender gap among migrant workers represent the necessary steps for enhancing social harmony in the Chinese society.
Local financial intermediation and foreign direct investment: Evidence from China
We examine the causal relationship between local financial intermediation (LFI) and foreign direct investment (FDI) in China. Using the only data available on LFI from 166 Chinese cities over the period 2003–2009, and addressing endogeneity in the relationship, we find that a 1% improvement in LFI raises FDI in a representative city by 3.77%. Use of city-level data allows us to explore heterogeneity in the relationship across cities. When we do this, we find that the relationship is much stronger in inland cities than in coastal cities. Conceptually, our findings suggest that deeper LFI mitigates the cost of doing business in economically backward inland cities. Methodologically, our findings are robust to different estimators, model specifications, and measures of FDI. From a policy perspective, we show that improving LFI can be a preferred alternative to concessional arrangements for attracting FDI. Our finding suggests a new transmission channel of LFI in economic development across the emerging markets.
Can foreign direct investment harness energy consumption in China? A time series investigation
This study assesses the long-run relationship and short-run dynamics between foreign direct investment (FDI) and energy consumption in China. Applying the bounds testing approach to annual data from 1982 to 2012, we find that a stable FDI-energy nexus exists in the long run and a 1% increase in FDI reduces energy consumption by 0.21%.However, this study shows a positive association between FDI and energy consumption in the short run, attributing to the dominance of the scale effect. Our results remain robust to different measurements and estimators. It is suggested that the Chinese government shall support the inward FDI in the tertiary and energy sectors and strengthen local absorptive capacities to fully internalize FDI-related knowledge spillovers in energy conservation.
Does human capital matter for energy consumption in China?
This article investigates the dynamic relationship between human capital and energy consumption using Chinese provincial data over the period 1990-2010. Considering for cross-sectional dependence and parameter heterogeneity across space and over time, we identify a significant and negative human capital-energy consumption relationship in China. Specifically, we find that a 1% increase in human capital reduces energy consumption by a range between 0.18% and 0.45%. Furthermore, this negative relationship can be attributed to stronger accumulation of post-school human capital in eastern China. This finding suggests that energy conservation in China could be achieved by improving post-school human-capital components such as on-the-job training, experience and learning-by-doing.