The Institutional Foundation of Foreign-Invested Enterprises (FIEs) in China

Foreign-invested enterprises (FIEs) are now an important component of the Chinese economy. Since 1992, the growth of FIEs has been exponential. However our understanding of the institutional factors driving the FIE growth remains limited. This paper uses data from 39 industries in China for a period of three years (1995-1997) to explore the institutional foundation of the FIE growth. Our findings suggest that the debt obligations on the part of the SOEs and the local control of the SOEs promote the growth of FIEs and that some of the foreign direct investment (FDI) inflows result in acquisition of existing assets and shift asset controls from SOEs to FIEs.http://deepblue.lib.umich.edu/bitstream/2027.42/39649/3/wp264.pd

The Institutional Foundation of Foreign-Invested Enterprises (FIEs) in China

Foreign-invested enterprises (FIEs) are now an important component of the Chinese economy. Since 1992, the growth of FIEs has been exponential. However our understanding of the institutional factors driving the FIE growth remains limited. This paper uses data from 39 industries in China for a period of three years (1995-1997) to explore the institutional foundation of the FIE growth. Our findings suggest that the debt obligations on the part of the SOEs and the local control of the SOEs promote the growth of FIEs and that some of the foreign direct investment (FDI) inflows result in acquisition of existing assets and shift asset controls from SOEs to FIEs.foreign direct investment, economic transition, China

A Tale of Two Provinces: The Institutional Environment and Foreign Ownership in China

In this paper, we use a unique dataset covering joint ventures in two provinces of China, Jiangsu and Zhejiang, to test the effect of the institutional environment for domestic private firms on ownership structures of FDI projects. Unlike many studies on this subject, we approach the issue from the perspective of local firms seeking FDI rather than from the perspective of foreign firms seeking to invest in China. Applying the prevailing bargaining framework in studies on ownership structures of FDI projects, we find that a more liberal institutional environment for domestic private firms is associated with less foreign ownership of the joint ventures operating there. Several mechanisms can contribute to this outcome. One is that a more liberal institutional environment may enhance the bargaining power of those domestic firms negotiating with foreign firms to form alliances (the capability effect). The other mechanism is that a more liberal institutional environment may reduce some of the auxiliary benefits associated with FDI—such as greater property rights granted to foreign investors—and thereby attenuate incentive to form alliances with foreign firms (the incentive effect).http://deepblue.lib.umich.edu/bitstream/2027.42/40053/3/wp667.pd

A Tale of Two Provinces: The Institutional Environment and Foreign Ownership in China

In this paper, we use a unique dataset covering joint ventures in two provinces of China, Jiangsu and Zhejiang, to test the effect of the institutional environment for domestic private firms on ownership structures of FDI projects. Unlike many studies on this subject, we approach the issue from the perspective of local firms seeking FDI rather than from the perspective of foreign firms seeking to invest in China. Applying the prevailing bargaining framework in studies on ownership structures of FDI projects, we find that a more liberal institutional environment for domestic private firms is associated with less foreign ownership of the joint ventures operating there. Several mechanisms can contribute to this outcome. One is that a more liberal institutional environment may enhance the bargaining power of those domestic firms negotiating with foreign firms to form alliances (the capability effect). The other mechanism is that a more liberal institutional environment may reduce some of the auxiliary benefits associated with FDI—such as greater property rights granted to foreign investors—and thereby attenuate incentive to form alliances with foreign firms (the incentive effect).China, FDI, private sector, institutional environment, joint venture

China's Cadre Transfer Policy toward Tibet in the 1980s

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/68381/2/10.1177_009770049502100202.pd

How Did China Take Off?

There are two prevailing perspectives on how China took off. One emphasizes the role of globalization-foreign trade and investments and special economic zones; the other emphasizes the role of internal reforms, especially rural reforms. Detailed documentary and quantitative evidence provides strong support for the second hypothesis. To understand how China's economy took off requires an accurate and detailed understanding of its rural development, especially rural industry spearheaded by the rise of township and village enterprises. Many China scholars believe that township and village enterprises have a distinct ownership structure-that they are owned and operated by local governments rather than by private entrepreneurs. I will show that township and village enterprises from the inception have been private and that China undertook significant and meaningful financial liberalization at the very start of reforms. Rural private entrepreneurship and financial reforms correlate strongly with some of China's best-known achievements-poverty reduction, fast GDP growth driven by personal consumption (rather than by corporate investments and government spending), and an initial decline of income inequality. The conventional view of China scholars is right about one point-that today's Chinese financial sector is completely state-controlled. This is because China reversed almost all of its financial liberalization sometime around the early to mid 1990s. This financial reversal, despite its monumental effect on the welfare of hundreds of millions of rural Chinese, is almost completely unknown in the West

Economic Fragmentation and FDI in China

China is one of the most popular investment destinations in the world. This paper argues that FDI inflows into China are in fact driven by some fundamental inefficiencies in the Chinese economy. Specifically, one of the inefficiencies has to do with a high level of fragmentation of both goods and asset markets. This fragmentation increases demand for FDI both because market fragmentation makes indigenous Chinese firms uncompetitive and because market fragmentation creates more investment opportunities for the mobile foreign capital. This paper is a chapter from a larger book-length research project, tentatively entitled, Selling China: The Institutional Foundation of Foreign Direct Investment During the Reform Era.http://deepblue.lib.umich.edu/bitstream/2027.42/39758/3/wp374.pd

Why More is Actually Less: New Interpretations of China's Labor-Intensive FDI

The fact that China is the second largest recipient of FDI in the world has been heralded by economists and government officials alike as one of the crowning achievements of Chinese economy. This paper questions this perspective. The paper focuses on FDI from ethnically Chinese economies (ECEs), which has financed China's labor-intensive industries and its export growth. First, the paper shows that the conventional wisdom about why China attracts so much labor-intensive FDI is flawed. Second, the paper offers what might be called an institutional foundation argument to explain the phenomenon of China's labor-intensive FDI. Labor-intensive FDI, according to this argument, is fundamentally driven by a political pecking order of firms in China that systematically disadvantages indigenous private firms both financially and legally. Labor-intensive FDI rises to alleviate the liquidity constraints afflicting Chinese private firms as efficient private entrepreneurs have no choice but to cede their claims o in future cashflows to raise financing for their businesses.FDI, capitol market, transitional economies