Foreign Direct Investment, Capital Flows, and Urbanization: the Case of China

Abstract

With a surge in foreign direct investment (FDI), the People’s Republic of China (PRC) made great achievements in urbanization during the three decades since the reforms and opening-up policies were implemented. This chapter investigates the trends and patterns in FDI and domestic capital flows, and their roles in the process of urbanization. The big picture in capital flows in the PRC is that both FDI and private domestic capital concentrate on the coastal areas, while government transfers flow mostly to the middle and western regions. At the same time, under more favourable government policies, both FDI and private capital are moving to the middle and west. It has been found that FDI affects the speed and pattern of urbanization by creating more jobs and affecting the extent and direction of migration.