The Effect of Foreign Direct Investment on the Chinese Economy between 1980 and 2010

Does foreign direct investment have a positive effect on China’s GDP per capita? This thesis investigates the effect of FDI on GDP per capita in China between 1980 and 2010. The augmented Solow model is used as a framework to determine this effect. Prior to the actual empirics are an historical overview, analysis of growth drivers and an analysis on determinants of FDI. The results of my panel study show that FDI has a positive effect on GDP per capita. This result remains consistent and significant when additional control variables are added and when standard errors are clustered by province.