Regional distribution of foreign direct investment in real estate industry in China

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Regional distribution of foreign direct investment in real estate industry in China

 

Author: Zhu, Rui
Title: Regional distribution of foreign direct investment in real estate industry in China
Degree: M.Sc.
Year: 2013
Subject: Investments, Foreign -- China.
Real estate business -- China.
Hong Kong Polytechnic University -- Dissertations
Department: Faculty of Construction and Environment
Pages: vi, 65 p. : ill. ; 30 cm.
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2646829
URI: http://theses.lib.polyu.edu.hk/handle/200/7172
Abstract: The reform and opening-up policy of China has made the country one of the most active countries in the global economy, with a great amount of foreign direct investment (FDI) flooding in. Among various industries, the manufacturing and real estate industries attract the majority of FDI. FDI promotes the opening of Chinese markets and thus speeds up the advancement of marketization and stimulates the development of demotic enterprises. Therefore, FDI is of great significance to China. Although the central government has restricted FDI in the real estate market, because of the overheating market, the amount of FDI in the real estate industry (FDIRE) is considerable. As a major branch of FDI, FDIRE distribution in China is also unbalanced with changeable trends. Before 2001, the eastern region had absolute advantages in attracting FDIRE because of its geographical superiority and the supportive policies of the state. The rise of the central and western regions has provided foreign developers with an even broader market. FDIRE distribution is significant, but research on this trend has been limited. This study divides China into three main regions: the eastern, central, and western regions. Using statistical data on 29 provinces, this study observes the location of FDIRE in different regions throughout China from 2002 to 2011. Regression analysis of panel data is conducted to measure the impact of each factor selected by considering the features of the Chinese real estate market on the decisions of foreign developers. The results show that a developed local economy contributes to a "crowding out" effect rather than attract FDIRE. The openness of the economy is no longer a significant influence on the location of FDIRE because China has been open on a full scale for a relatively long time. FDIRE minimizes costs and maximizes revenues, similar to traditional investment. Foreign investors avoid investing in provinces with high labor costs, but high housing prices strongly attract them. Foreign investors in the real estate industry also favor provinces with good infrastructure. Foreign developers also follow their customers abroad. A province having more foreign-fund companies and often visited by overseas tourists is very attractive to FDIRE. Based on these figures, provinces should cultivate their strengths and circumvent their weaknesses to attract and utilize FDIRE.

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