Abstract
Based on the annual data of China from 2000 to 2014, this paper applies the dynamic panel model to study the relationship between inbound tourism and foreign direct investment (FDI). Compared with previous literatures, our analysis is not limited to the study of FDI in single tourism sectors such as hotels and restaurants, but takes general FDI into consideration. The empirical results show that the growth of inbound tourism can not only promote FDI flow into the tourism industries, but also increase the inflows of FDI to other sectors. In other words, the flourished inbound tourism may have spillover impacts of FDI on non-tourism sectors. It’s also indicated that the two policies of inbound tourism improvement and inward FDI promotion are complementary. Therefore, I believe coordination can maximize the effect of policies, because the two policies may coordinate with each other to achieve economic growth targets.
Highlights
With various countries slowing down the pace of economic development, China’s economy has shown a new normal
This paper examines the relationship between inbound tourism and inward foreign direct investment (FDI) in the framework of FDI determination
The results indicate that FDI in other industries needs to be included, while discussing the impacts of tourism enhancement
Summary
With various countries slowing down the pace of economic development, China’s economy has shown a new normal. The tourism industry is becoming a new engine of economic growth under the new normal. In this context, promoting the development of tourism industry, which is called “sunrise industry”, is important. The enhancement of China’s tourism is in great need of financial support that mainly comes from government funds, domestic capital and inward FDI. This paper will start from the spillover effect of tourism development on FDI to explore the relationship between inbound tourism and inward FDI by applying dynamic panel models. The conclusion reveals that enhanced international tourism may achieve economic growth targets through increased FDI inflows into tourism-related and non-tourism industries.
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