Trade Costs and Location of Foreign Firms in China

Information about Asia and the Pacific Asia y el Pacífico

Journal Issue

Volume/Issue:: 2005/55
Series:: IMF Working Papers
Author(s):: International Monetary Fund
Publisher:: INTERNATIONAL MONETARY FUND
Published Date:: March 2005
DOI:: http://dx.doi.org/10.5089/9781451860740.001
ISBN:: 9781451860740
ISSN:: 1018-5941
Page:: 25

This study examines the determinants of entry into by foreign firms, using information on 515 Chinese industries at the provincial level during 1998-2001. The analysis, rooted in the new economic geography, focuses on market and supplier access within and outside the province of entry, as well as production and trade costs. The results indicate that market and supplier access are the most important factors affecting foreign entry. Access to markets and suppliers in the province of entry matters more than access to the rest of China, which is consistent with market fragmentation due to underdeveloped transport infrastructure and informal trade barriers.

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Trade Costs and Location of Foreign Firms in China