Regional Distribution of Taiwanese Direct Investment in China: Recent Trends and Determinants

Abstract

This paper seeks to explain uneven distribution of Taiwanese direct investment in China. Using firm-level data, we find that such a pattern can be attributed to different characteristics of key economic regions. Furthermore, we find evidence that the probability of a province being selected by a Taiwanese investor increases with the extent of industrial linkages and labour-market pooling. Importantly, we find evidence that the structure of the Retail and Service industry's location choice is markedly different to its Manufacturing counterpart.