Does China rival its neighbouring economies for inward FDI?*

The current research aims to contribute to the debate on whether China competes with its neighbouring economies for inward foreign direct investment (FDI). Our results indicate that China has not diverted inward FDI from other Asian economies as a whole. If we view FDI inflows in the region as part of systemic globalization strategies adopted by transnational corporations, China may in fact have “crowded in” FDI to the rest of Asia. At the level of individual economies, FDI in China is more likely to have had an FDI creation effect in India and the Philippines, but a diversion effect in Indonesia, the Republic of Korea, Malaysia and Taiwan Province of China, as value creation activities performed by China in international production networks appear to be more complementary to those undertaken by the former two economies than the latter four economies. These relative positions may evolve as Asian economies develop and upgrade their industries.