Rethinking FDI and Growth in China: The Role of Technology Spillovers
China has consistently attracted the highest foreign direct investment (FDI) inflows among developing nations for three decades. However, transitioning to a high-income economy requires a shift from relying on FDI for poverty alleviation to leveraging it for wealth creation. This study investigates...
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| Format: | Thesis |
| Language: | English English English |
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International Journal of Economics and Financial Issues
2025
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| Online Access: | http://ir.unimas.my/id/eprint/49985/ |
| Abstract | Abstract here |
| Summary: | China has consistently attracted the highest foreign direct investment (FDI) inflows among developing nations for three decades. However, transitioning to a high-income economy requires a shift from relying on FDI for poverty alleviation to leveraging it for wealth creation. This study investigates the impacts of technology spillover on China's economic growth, focusing on its direct, indirect, and spatial effects. Based on Neoclassical and Exogenous growth theories, technology spillover and FDI are the key variables, with trade openness, government expenditure, and total population as control variables, and economic growth as the dependent variable. This study employs a panel dataset from 30 Chinese provinces spanning 2000-2022, sourced from the China Statistical Yearbook. Methodologically, the Cross-Section Dependence test, Augmented Mean Group (AMG) model, and Spatial model are used. Findings confirm cross-sectional dependence, validating the AMG model. Direct effects reveal that research and development (R&D) and real government expenditure significantly drive economic growth, while real FDI and trade openness are both insignificant and negatively correlated. Indirect effects highlight R&D's significant role in the relationship between FDI and economic growth. Spatial analysis reveals positive and significant coefficients for R&D, FDI, and government expenditure, emphasizing that neighbouring provinces exert a considerable influence on their growth. The implications of these findings are: first, fostering R&D investment is critical to magnifying the benefits of FDI and enhancing economic growth. Second, policies should focus on strengthening inter-provincial cooperation to maximize spatial spillover effects. Finally, aligning trade openness with sustainable growth strategies is important. |
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