Pantelis Pantelidis, Ph.D1, Dimitrios Kyrkilis, Ph.D2, and Taxiarhis Delis, M.A.2. (1) Economics, University of Piraeus, 80, Karaoli and Dimitriou str., Piraeus, 15125, Greece, (2) Department of Balkan, Slavic and Oriental Studies, University of Macedonia, 156 Egnatias str.,, Thessaloniki, GR-54006, Greece
In the two and a half decades since economic reforms were initiated in 1978, China became the largest recipient of FDI among developing countries. FDI attraction is an important component of China’s economic policy.
The aim of the current paper is to explore the determinants of inward FDI to China. A model has been constructed containing FDI explanatory variables proposed by both theoretical and empirical economic literature along variables pertaining to specific economic and institutional characteristics of the Chinese case. The model was tested in its logarithmic form using appropriate econometric techniques for the period 1979 – 2006. Annual data sourced in various, mainly Chinese databanks were employed for the same period. The results show that there is a strong relationship between incoming FDI to China and a number of variables such as labour cost, growth rate, demand variables, total fixed assets, institutional and legal environment.