Foreign ownership of equity joint ventures in China: a pooled cross-section–time series analysis

Abstract

Foreign investment in China has increased rapidly over a short period of time making that country the second largest recipient of foreign direct investment (FDI) in the world. The most common form of undertaking investment in recent years has been through equity joint ventures (EJVs). This paper analyzes the factors that influence the share of foreign ownership of a sample of 3090 EJVs in China over the 1992–1995 period by using pooled cross-section–time series methods. The results show that the duration of the EJV agreement, the origin of the foreign investor, the size and location of the project are all statistically significant in influencing the level of foreign ownership. The results also show a significant difference between the share of foreign ownership of EJVs in manufacturing and service sector industries and a gradual trend towards higher levels of foreign ownership in Chinese EJVs in recent years.