erethesubscript“i”a
d“t”sta
dsforcou
tryiatperiodta
dthevariablesusedi

fthisa
alysisaredefi
edbelow
AFDIthelevelofi
wardforeig
directi
vestme
ti
theithAsia
eco
omies
it
i
yeartCLNFDIi
wardforeig
directi
vestme
ti
toChi
ai
yeart
t
AGROWTHgrowthrateofGDPofcou
tryiattimet
it
CGROWTHgrowthrateofGDPofChi
aattimet
t
ACORRUPTa
i
dexofcorruptio
ofcou
tyiattimet
it
CCORRUPTa
i
dexofcorruptio
ofChi
aattimet
t
ADUTYimportdutyofcou
tryiattimet
it
CDUTYimportdutyofChi
aattimet
t
AWAGEaveragewagei
ma
ufacturi
gofcou
tryiattimet
it
CWAGEaveragewagei
ma
ufacturi
gofChi
aattimet
t
AOPENtheshareofexportsa
dimportsi
GDPofcou
tryiattimet
it
COPENtheshareofexportsa
dimportsi
GDPofChi
aattimet
t
AILLITtheperce
tageofpeoplewhoareilliterateofcou
tryiattimet
it
3
I
futurestudieswei
te
dtoi
cludeotherAsia
eco
omiessuchasI
diaa
dPakista

ATAXcorporatetaxrateofcou
tryiattimet
it
AGOVa
i
dexofgover
me
tstabilityofcou
tryiattimet
it
CGOVa
i
dexofgover
me
tstabilityofChi
aattimet
t
ATEL
umberoftelepho
emai
li
esper1000peopleofcou
tryiattimet
it
AINCOME
it
percapitaGDPofcou
tryiattimet
fCINCOMEpercapitaGDPofChi
aattimet
t
OUTFLOWtotaloutflowsofdirecti
vestme
ttotheworldattimet
t
Thei
depe
de
tvariablesexami
edi
thea
alysisarebelievedtoexerta
i
flue
ceo
i
wardforeig
directi
vestme
ti
eachcou
tryofAsiaa
dChi
abycha
gi
gthei
vestme
te
viro
me
tthroughi
stitutio
ala
dpolicycha
gesaswellasthereleva
teco
omicco
ditio
sThemai
variablethatweshallexami
ei
thispaperistheproxyfortheChi
aeffectCLNFDIThereareatleasttwoaspectsthatweshouldco
siderhereFirsti
exami
i
gwhichlowwageexportplatformtolocatemulti
atio
alsmaychoosebetwee
i
vesti
gi
Chi
avsi
vesti
gi
a
otherAsia
cou
trysayThaila
dI
thiscasethemulti
atio
alswillstudythewholehostoffactorsi
cludi
gwageratespoliticalrisksi
frastructureetcthatwouldmakeacou
trydesirableasasiteforlowcostproductio
I
vesti
gi
Chi
awillthe
reducetheFDIi
a
otherAsia
eco
omysayThaila
dThesig
ofCLNFDIaccordi
gtothisargume
tis
egativeWeshallcallthisthe“i
vestme
tdiversio
effect”Theseco
daspectistheproductio
a
dresourceli
kagesbetwee
agrowi
gChi
aa
dtherestofAsiaI
ma
ufacturi
gthistakesoftheformoffurtherspecializatio
a
dgrowi
gfragme
tatio
oftheproductio
processesA
i
vestorsetsupfactoriesi
bothChi
aa
dThaila
dtotakeadva
tageoftheirrespectivecompetitive
essi
disti
ctstagesofproductio
sCompo
e
tsa
dpartsarethe
tradedamo
gChi
aa
dotherAsia
eco
omiesA
i
creasei
Chi
a’sFDIir