Determinants of Hong Kong manufacturing investment in China: a survey

Abstract

This paper aims to examine the determinants of foreign direct investment (FDI) in China by investigating Hong Kong’s manufacturing industries established in Guangdong province, and to compare the difference between market‐oriented and export‐oriented, and between capital intensive and labor intensive FDI in investment decision making. A questionnaire survey is used to verify our argument. It is found that most of Hong Kong’s manufacturing investments are labor‐intensive and export‐oriented. The most important determinants of Hong Kong’s manufacturing investment in China are cheap labor and land, stable political environment, government incentive policies and high investment return. The most important location‐specific advantages are geographical proximity to Hong Kong, better preferential treatment, good infrastructure, and absence of language barrier. It is also found that export‐oriented FDI tends to be efficiency‐seeking while market‐oriented FDI appears to be resource‐seeking.