FDI inflows and the economic growth of city clusters: evidence from China's Yangtze River Economic Belt

Abstract

This study investigates the impact and transmission mechanism of foreign direct investment (FDI) inflows on the economic growth of city clusters. Via theoretical analysis, a spatial Durbin model (SDM) and mediating effect model are applied based on panel data of the three major city clusters in the Yangtze River Economic Belt (YREB) from 1997 to 2018. The results reveal the following: (1) FDI inflows promote the economic growth of city clusters in the YREB, but the degrees of impacts on the three city clusters are different; (2) the spatial effects of FDI inflows differ across city clusters; the effects are negative in city clusters of the Yangtze River Delta and the Yangtze River Middle Reaches, and positive in the Chengdu-Chongqing city cluster; (3) urbanization and industrial structure upgrading are two important mechanisms by which FDI inflows promote the economic growth of city clusters. However, there are differences among the three major city clusters; the intermediary effect of urbanization is more significant in city clusters of Chengdu-Chongqing and the Yangtze River Middle Reaches, while the intermediary effect of industrial structure upgrading is more significant in the Yangtze River Delta and Chengdu-Chongqing city clusters. Policy implications are proposed accordingly.

Keywords:

• FDI inflows
• economic growth of city clusters
• spatial spillover effect
• mediating effect
• Yangtze River Economic Belt (YREB)

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 RMB is the abbreviation for the Chinese renminbi.

2 The three cities of Xiantao, Qianjiang, and Tianmen in the YRM city cluster were excluded due to a large amount of missing data.

3 The National Bureau of Statistics in China stopped publishing the China Regional Economic Statistical Yearbook after 2014.

4 OLS regression results and LM test results are available upon request.

5 The results of the LR tests and Hausman tests are exhibited in Table 3.

Additional information

Funding

This research was funded by the Ministry of Education Country and Regional Studies (Project No. 2021-N09), the Major Key Projects of Philosophy and Social Sciences of Chongqing Municipal Education Commission (Project No.19SKZDZX05).

Notes on contributors

Yang Liu

Yang Liu, a PHD candidate at the School of Public Policy and Administration from Chongqing University. His research interests include public economics and public policy and international trade.

Jing Li

Jing Li, professor and Vice President of Chongqing Technology and Business University, He has published more than 70 academic papers and reports in top journals in the field of economics and management in China such as Economic Research Journal and Management World, etc. Professor Li is awarded the title of 'State Council Special Allowance Expert' and is a candidate of the Ten-thousand Talents Program, a national special support program for high-level personnel recruitment in China.

Li Lei

Li Lei, a lecturer at the School of Economics from Chongqing Technology and Business University. Her research interests include international economics and trade,regional economics.

Lingli Xiao

Lingli Xiao, a lecturer at the School of Economics from Chongqing Technology and Business University. Her research interests include international economics, rural investment.