Many worry than China’s dramatic success has diverted FDI flows away from other Asian economies. Benoît Mercereau claims that perhaps these concerns are exaggerated:
We develop a new methodology to estimate crowding out, and we use it to investigate the impact of China's emergence on FDI flows to Asia using data from 14 Asian economies from 1984 to 2002. The results suggest that China did not have much impact on FDI to other countries. In particular, low-income economies, which compete with China for low-wage investment and countries with low levels of education or scientific development, do not seem to have been especially affected.
Update: On the flip-side, Alexandra Harney tells us in today's FT that many rich countries are trying to court the 'dragon'.
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