Productivity spillovers from foreign direct investment in Chinese industries

This paper investigates productivity spillover effects of FDI and relates it to the capital- or labour-intensive nature of the industry. Using a panel data set of 35 industries in China, it shows that the presence and magnitude of FDI spillover effects vary by different channels and the nature of the industry. On average, FDI has no horizontal spillover effects but has positive backward linkage effects. However, there are substantial differences in FDI spillover effects via demonstration, competition and labour mobility between capital- and labour-intensive industries. The findings have important policy implications.