Spatio-temporal development of foreign investment in Guangdong, 1980-2006

Abstract

 Since China’s economic reform and opening up to the outside world, foreign investment has become the major dynamo of regional development in China. Under the polarized development strategy in the 1980s and 1990s, foreign investment has been highly concentrated in the coastal regions and the uneven distribution of foreign investment may be partly responsible for the significant regional disparity at the inter-provincial or even intra-provincial level within the country. Since the early 2000s, with China’s integration into the global economy and the dynamic economic restructuring in the coastal regions, foreign investment has been undergoing redistribution with the country.

Based on a combination of both quantitative and qualitative research methods, this study examines the spatio-temporal pattern and dynamics of foreign investment from different sources within a full coverage of time periods from China’s opening up to recent years (1980-2006) at the intra-provincial level in Guangdong. This study demonstrates that the spatio-temporal pattern of foreign investment in Guangdong has transformed from having Shenzhen as its single growth pole in the early stage to having Shenzhen and Guangzhou as bi-growth poles in the later stages and foreign investment has widely diffused via the transportation lines from the growth poles to the peripheral regions within or out of the province. The emergence of Shenzhen instead of Guangzhou as the initial growth pole enriches traditional theories and empirical experiences of having the historic economic and industrial centre as the growth pole in the early stage of take-off of a region. Moreover, this study examines the theoretical base and effectiveness of the growth pole strategy and argues that it can be a means of transferring economic growth to new regions instead of reinforcing the cumulative effects of polarized development. Most failure of the growth pole strategy is due to the procedure of the implementation instead of the theoretical base of the strategy.

To explain the initial and ongoing diffusion of foreign investment in Guangdong, this study proposes a multi-level analytical framework, which includes the push and pull factors of home and host regions at the local level, the role of government at the regional level, the structure of global production network at the global level, and the characteristics of foreign investment form different sources at the firm level. Specifically, four distinctive diffusion models of foreign investment are identified, i.e. the “cost-and-government-driven” model of Hong Kong firms, the “supply-chain-driven” model of Taiwan firms, the “market-and-group-driven” model of Japan firms, and the “market-and-institution-driven” model of US firms. This study suggests that the local push and pull factors are far from enough in interpreting such dynamic and various patterns of the diffusion of foreign investment, which should be put into a multi-level context including the local, regional, global and firm level factors and considerations. In-depth knowledge of the spatio-temporal pattern and dynamics of foreign investment from different sources is considered as the prerequisite to improve the efficiency of government development policies.