Transnational corporations and their impact on regional economic imbalance -: Evidence from China

Statistical data and company interviews reveal that foreign direct investment (FDI) in general and transnational corporations (TNCs) in particular reduced China's regional economic imbalance in the first decade of their involvement, but that large TNCs then helped to increase regional disparity. Contrary to the evidence from many countries, this scenario is related both to the special relationship between Hong Kong and Guangdong, and to the time it took many large TNCs to invest in economically central locations after FDI. China's experience supports the thesis that enterprises with foreign investment gradually disperse from their early locations. The paper concludes with some recommendations for policy makers.