Abstract
The results of the quantitative analysis, performed in this article, indicate that the main determinants of FDI during the period 1979–95 and JDI and KDI inflow during 1989–95 in China were the size of the market, the low cost of labor, favorable exchange rates and tarift’ protection. This finding supports the hypothesis that the size of local market and labor costs are the predominant determinants when foreign firms are considering an outward investment. Foreign firms seem to be attracted by the rapidly growing large market and the low-cost advantages, which stimulates them to move their establishments into this relatively cheap-labor country in order to gain a competitive edge.
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