Spatio-temporal development of foreign direct investment in Guangdong, China from 1980 to 2011

Abstract

This study examines the diffusion and determinants of foreign direct investment (FDI) in Guangdong, the traditional growth pole in China, between 1980 and 2011. FDI have been gradually diffused from the growth poles to the peripheral regions in Guangdong, with Shenzhen as the main growth pole at the early stage, and Shenzhen and Guangzhou as the bi-growth poles at the latter stages. The re-emergence of Guangzhou, the historical economic, political, cultural, and industrial center of Guangdong, as the growth pole at the later stages is different from the conventional theories and experiences of FDI that the historical economic and industrial center is usually the growth pole in the early stage of the takeoff. The trickling down effect of the growth poles on the peripheral regions is evident in Guangdong. Both the market force and the government are considered as important players in the emergence of these growth poles and the subsequent diffusion of FDI. By concentrating available investment and favorable policies as well as by improving the infrastructure in growth poles at the early stage, the government can stimulate the growth of FDI and industries in less developed regions. On the other hand, as the investment environment improves, the role of the government diminishes. FDI would be increasingly encouraged by access to domestic market, strong economic strength, and a sound manufacturing base. The influence of incentives in taxation, tariff, and foreign currency exchange had declined. Finally, the policy implications of these findings for promoting the diffusion of FDI in China are discussed.