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Information Externalities Affecting the Dynamic Pattern of Foreign Direct Investment: The Case of China
Author:
Sayuri Shirai null

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Dongpei Huang null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1994: Issue 044
Language:
English
Publication Date:
01 Apr 1994
DOI:
https://doi.org/10.5089/9781451974645.001
ISBN:
9781451974645
ISSN:
1018-5941
Pages:
28
Keywords:
WP; pioneer investor; investment environment; investors search; a number of investor; investors' expectation; investors from Hong Kong; Foreign direct investment; Special economic zones; Asia and Pacific; Southeast Asia
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The dynamic pattern of foreign direct investment (FDI) in developing countries shows a three-phase pattern. Despite government policies that promote it, initially the inflow of FDI is sluggish, followed by a period of considerable fluctuation before finally entering the stage of rapid growth. The paper explains the pattern through recourse to two concepts: the searching process of individual investors and the information externalities of investors in the aggregate. Policy implications that may serve to shift an economy of a developing country from small-scale FDI to one of rapidly expanding FDI are considered. As China is a clear example of this pattern, it has been selected to promote understanding of the process.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund