Title: The end of cheap labour
Subtitle: Are foreign investors leaving China?
Authors: Donaubauer, Julian 
Dreger, Christian
Language: en
Issue Date: 2016
Document Type: Working Paper
Journal / Series / Working Paper (HSU): Discussion papers / Deutsches Institut für Wirtschaftsforschung 
Issue: 1598
Publisher Place: Berlin
Abstract: 
Chinas government is promoting the shift towards a consumption-based economy since a few years. The explicit goal to significantly raise the percentage of wages in the national household income is integral part of the 12th Five-Year Plan (2011-15). The changes in the economic strategy are likely to affect the attractiveness of the country to foreign investors. In this paper, we raise the hypothesis that soaring wages negatively affect FDI inflows to China and alter the distribution of FDI over Chinese provinces. In addition, low-wage countries in the geographical surrounding might benefit from the changed direction of FDI inflows. By performing panel models with spatial effects for both Chinese provinces and developing ASEAN countries, regional dependencies are explicitly addressed. We provide strong and robust evidence that the wage increases change the distribution of FDI within China. In addition, we show that the changes in Chinas economic strategy improve the chances of its low-income neighbours to attract FDI.
Organization Units (connected with the publication): VWL, insb. Konjunktur und Wachstum 
URL: https://ub.hsu-hh.de/DB=1.8/XMLPRS=N/PPN?PPN=865261237
https://ub.hsu-hh.de/DB=1.8/XMLPRS=N/PPN?PPN=864431627
http://hdl.handle.net/10419/144824
http://www.diw.de/sixcms/detail.php?id=diw_01.c.539945.de
Appears in Collections:2016

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