Foreign Direct Investment, Migration and Locational Factors in China, 1985–1997

Abstract Foreign investment is playing an increasingly important role in transitional economies, not only in their overall economic growth but also in the configuration of their spatial economies. In China, foreign direct investment was as unevenly distributed in the late 1990s as in the 1980s, a testimony to the validity of the three-economic-belts and ladder-step conceptualizations of regional development. Despite a slight diffusion from the southern coast to the north, the eastern coastal region remains an unequivocal leader in the receipt of foreign investment. In this paper, we show that the relative stickiness of foreign investment is attributable to the coalescence of favorable locational factors in the eastern coastal region, including not only government policy and social affinity, but also labor migration. While the literature focuses mostly on foreign investment as a determinant of internal migration, this paper highlights also migration as a factor of foreign investment. We argue that migrants who move to the eastern coastal region and who do not have permanent resident rights in the destination constitute a labor regime and supply conducive to the concentration of foreign investment. The findings support the notion that a two-way, mutually reinforcing relationship exists between foreign investment and migration.