From the very beginning of China’s open door policy in 1979, China’s preferential FDI polices have generally favored the coastal provinces, which has led to a pronounced regional disparity in FDI. Since 1992, the Chinese government has implemented a series of polices to reduce FDI regional disparity and diversify inward FDI to Western and Central provinces. This article uses a regression–based approach to assess the contribution of China’s preferential FDI policy changes toward FDI regional disparity. Our results suggest that the contribution of China’s regionally preferential FDI polices in inward FDI disparity decreased from 24 percent in 1990 to 13 percent in 2005. China’s preferential FDI policy changes dominate all the other factors in reducing China’s inward FDI regional disparity during this period.
Journal of World Trade