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Economic development

Uneven FDI Distribution Contributes to Economic Inequality

Strategic Insights

— 1 min read

Researchers from the College of Business in Qatar's University Doha Science and Technology have made significant findings in the area of trade and economic development, specifically regarding the impact of foreign direct investment (FDI) on China's economic landscape. According to their study, published in The Journal of International Trade & Economic Development, the uneven distribution of FDI in China has led to economic inequality, with the poorest western region experiencing the most significant disparity.

Key Takeaways:

  • The uneven distribution of FDI contributes to economic inequality in China, with the poorest western region experiencing the most significant disparity.
  • Most studies on FDI in China use provincial data and parametric tools of analysis, delivering mixed findings regarding FDI's distribution and free trade zones' (FTZs) attractiveness.
  • The research investigated the convergence and transitional dynamics of relative FDI (RFDI) in China, using visual tools of the distribution dynamics approach to a panel of 273 prefectural cities from 2003 to 2019.
  • Convergence-divergence patterns were examined from inter- and intra-regional perspectives and FTZs vis-à-vis non-FTZ cities.
  • The results corroborate the New Growth and New Economic Geography theories, indicating an absence of desirable spatial diffusion from affluent 'core' cities and FTZs to 'peripheral' entities outside the FTZs.
  • A 'policy priority list' comprising western cities with above (below) average RFDI and the highest propensity to diverge further above (below) the national mean was provided.
  • Additional information may be obtained by contacting Michal Wojewodzki at the College of Business, University Doha Science and Technology, Qatar.

Statistics:

  • 273 prefectural cities were studied from 2003 to 2019.
  • The poorest western region experienced the most significant disparity in FDI distribution.
  • Convergence clubs emerged among non-FTZ entities with RFDI values of 0.05, 0.6, and 2.7.
  • Convergence clubs emerged among FTZ entities with RFDI values of 2.5 and 10.
  • The national average RFDI value was equal to one.

Sources:

  • Mapping the Dynamics of FDI in China: Convergence, Divergence, and Policy Insights Within Free Trade Zones and Beyond. (The Journal of International Trade & Economic Development, 2025;34(4):894-912)
  • NewsRx. Researchers from College of Business Discuss Findings in Trade and Economic Development (Mapping the Dynamics of FDI In China: Convergence, Divergence, and Policy Insights Within Free Trade Zones and Beyond). Economics Week. June 13, 2025; p 599.

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