Abstract
Regional economic integration has got great achievements both in practice and theory since 1980s, which promotes the progress of the world economic liberalization. Besides the trade creation and diversion effect which had been researched widely, regional economic integration agreement also would create investment among members, and this dynamic investment effect now has been the main factor which pushes the progress of integration. Based on DID model and Gravity Model, this paper examines the influence of CEPA on FDI to Mainland China from Hong Kong by setting matched group, using 1998-2013 FDI from Hong Kong as sample. The conclusion is that CEPA and its supplemental agreements play a positive role on attracting Hong Kong FDI to Mainland China. With the transformation of development model in Mainland China, Hong Kong will invest more capital in knowledge-intensive Service industries in the future.
Highlights
Due to the promotion from both developing and developed countries, such as the progresses of free trade areas in China and TPP negotiations dominated by the U.S.A., regional economic integration develops rapidly
To cater to this trend, Mainland China and Hong Kong officially signed “Closer Economic Partnership Arrangement” in June 29, 2003, and the agreement came into effect in 2004
CEPA is the first regional economic integration that Hong Kong joins in, and it means the economic cooperation between Mainland China and Hong Kong going deeper by more economically opening
Summary
Due to the promotion from both developing and developed countries, such as the progresses of free trade areas in China and TPP negotiations dominated by the U.S.A., regional economic integration develops rapidly. To cater to this trend, Mainland China and Hong Kong officially signed “Closer Economic Partnership Arrangement” in June 29, 2003, and the agreement came into effect in 2004. Whether the agreement of regional economic integration will promote FDI or not has not been empirically tested, while evaluating this effect by quantitative method can help us develop the investment theories of regional economic integration. Considering of the policy basis and realistic demand changing, the FDI may exist tendency variation since 2004, and if true, that will be a strong evidence of investment effects of CEPA
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