Trade and Foreign Direct Investment in China: A Political Economy Approach / Lee G. Branstetter, Robert C. Feenstra.

Format:

Book

Author/Creator:

Branstetter, Lee G.

Contributor:

National Bureau of Economic Research.

Feenstra, Robert C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7100.

NBER working paper series no. w7100

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Trade and Foreign Direct Investment in China

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

We view the political process in China as trading off the social benefits of increased trade and foreign direct investment, against the losses incurred by state-owned enterprises due to such liberalization. A model drawing on Grossman and Helpman (1994, 1996) is used to derive an empirically estimable government objective function. The key structural parameters of this model are estimated using province-level data on foreign direct investment and trade flows in China, over the years 1984-1995. We find that the weight applied to consumer welfare is between one-fifth and one-twelfth of the weight applied to the output of state-owned enterprises. We find that governmental preferences have shifted over time, but even in recent periods the weight on consumer welfare is only one-half of the weight on state-owned enterprises. This suggests that China may find it politically difficult to follow through with liberalizing its trade and investment regimes, such as under its WTO accession proposal.

Notes:

Print version record

April 1999.