Study on the relationship between foreign direct investment (FDI) and capital flight in China: 1992–2008

Abstract

Firstly, the paper analyses the relationship of capital flight and foreign direct investment. The premise of their relationship has been put forward, and 1992–2008 of capital flight was estimated to provide an empirical base for analysis of the determinants of Chinese capital flight. Secondly, the paper discussed the relationship of capital flight and foreign direct investment under different calculating methods. And finally, the paper employed econometric analytic methods to investigate the relationship between capital flight and foreign direct investment in China. The research results indicate that there is a positive correlation with strong significance between them. The paper investigates the causes of the different results. The research results manifest that the main driving factor to cause the domestic capital flight from China does not consist in the worsening of the investment environment, but to a large degree from the discriminatory policies between domestic capital and foreign capital.