Can FDI and ODI two-way flows improve the quality of economic growth? Empirical Evidence from China

Figures & data

Figure 1. Theoretical mechanism

Table 1. Economic growth quality classification and measurement criteria

The index name			Calculating mode	Index attribute
				Positive	Negative	Medium
Efficiency of economic growth	Factor productivity	Capital productivity	GDP/capital stock	√
		Labour productivity	GDP/employees	√
	Production organization efficiency	Total factor productivity	TFP	√
	Market efficiency	Product circulation efficiency	Total retail sales/GDP	√
		Financing efficiency	Financial sector output/GDP	√
		Technology integration efficiency	Technology market turnover/GDP	√
		Efficiency of labour integration	The unemployment rate		√
Stability of economic growth	Stability of factor supply	Capital price stability	Growth rate of real interest			√
		Labour price stability	Real wage growth rate			√
	Output stability	Output fluctuations	The GDP growth rate			√
		Price fluctuations	Rate of inflation			√
	Structural stability	National economic structure	Output value/GDP of private enterprises	√
		The trade structure	Total imports and exports/GDP	√
Economic growth sustainability	Long–term growth drivers	Industrial upgrading process	Tertiary industry/GDP	√
		Knowledge increment	The number of new patents issued by 10,000 people	√
		Research and development strength	R&D funds/GDP	√
	Human resource dynamics	Nonaging degree	Proportion of the population under 65	√
		Student – teacher ratio in compulsory education	Number of pupils/teachers in primary and junior middle schools		√
	Ecological environmental cost	Degree of air pollution	Sulphur dioxide emissions per unit of output		√
		Sewage discharge	Discharge of sewage per unit of output		√
		Solid waste discharge	Emissions of solid waste per unit of output		√

Table 2. Measurement results of economic growth quality

Province	Economic growth quality		Growth efficiency		Growth stability		Growth sustainability
	mean value	standard deviation	mean value	standard deviation	mean value	standard deviation	mean value	standard deviation
Beijing	2.16	1.19	1.37	0.75	0.69	0.27	2.60	1.70
Shanghai	1.72	1.30	1.43	0.92	0.52	0.20	1.80	1.81
Guangdong	1.13	0.79	0.35	0.58	1.08	0.18	0.86	0.95
Tianjin	0.92	1.02	0.79	0.88	0.07	0.15	1.01	1.04
Zhejiang	0.79	0.87	0.46	0.62	0.34	0.25	0.77	0.97
Hainan	0.70	0.85	0.34	0.60	0.37	0.48	0.54	0.67
Jiangsu	0.56	0.83	0.15	0.71	0.47	0.25	0.44	0.84
Tibet	0.31	0.55	0.30	0.58	−0.12	0.39	0.43	0.33
Fujian	0.24	0.60	0.45	0.55	0.17	0.19	−0.07	0.59
Chongqing	0.04	0.71	0.26	0.60	−0.08	0.28	−0.04	0.66
Shandong	−0.05	0.51	−0.05	0.54	0.12	0.20	−0.17	0.44
Hunan	−0.07	0.45	0.40	0.38	−0.20	0.24	−0.19	0.49
Hubei	−0.11	0.77	0.19	0.76	−0.12	0.33	−0.20	0.47
Inner Mongolia	−0.28	0.38	−0.09	0.41	−0.33	0.14	−0.34	0.31
Heilongjiang	−0.28	0.59	0.07	0.77	−0.30	0.17	−0.16	0.47
Liaoning	−0.29	0.59	0.13	0.75	−0.22	0.19	−0.29	0.32
Guangxi	−0.29	0.43	0.07	0.31	−0.04	0.29	−0.60	0.30
Sichuan	−0.30	0.55	−0.06	0.55	−0.15	0.25	−0.33	0.49
Jiangxi	−0.31	0.39	−0.07	0.32	0.04	0.22	−0.64	0.31
Jilin	−0.33	0.52	0.05	0.66	−0.30	0.12	−0.21	0.34
Henan	−0.40	0.46	−0.30	0.33	−0.02	0.25	−0.58	0.42
Shaanxi	−0.40	0.62	−0.39	0.67	−0.22	0.29	−0.23	0.45
Anhui	−0.48	0.50	−0.39	0.44	−0.23	0.24	−0.39	0.38
Hebei	−0.49	0.36	−0.29	0.43	−0.13	0.22	−0.57	0.28
Xinjiang	−0.53	0.41	−0.71	0.28	−0.11	0.21	−0.44	0.24
Gansu	−0.57	0.58	−0.68	0.51	−0.05	0.36	−0.38	0.40
Yunnan	−0.58	0.42	−0.50	0.42	−0.22	0.20	−0.50	0.27
Guizhou	−0.61	0.46	−0.74	0.42	−0.18	0.27	−0.42	0.32
Shanxi	−0.63	0.37	−0.69	0.53	−0.27	0.19	−0.44	0.36
Qinghai	−0.77	0.50	−0.96	0.57	−0.22	0.27	−0.64	0.20
Ningxia	−0.82	0.33	−0.91	0.33	−0.36	0.20	−0.61	0.22

The mean value is the average value for the period 2003–2017.

Figure 2. FDI, ODI and quality of economic growth

Data source: National Bureau of Statistics of China.

Figure 3. The quality of economic growth from 2003-2017

Table 3. Variable table

Variable type	Variable name	Specific connotation
Explained variable	Quality of economic growth	Comprehensive index of economic growth quality
Explanatory variables	Foreign direct investment	Adjusted per capita FDI stock (unit: CNY100/per captia)
	Outward direct investment	ODI stock per capita after adjustment (unit: CNY100/per captia)
Mediating variable	Employment effect index	Incomes of employees after price adjustment (unit: CNY)
		rate of employment (unit: %)
	Output efficiency index	Adjusted per capita GDP (unit: CNY)
		Energy consumption per 10,000 Yuan GDP (unit: CNY)
	Technology spillover index	Proportion of high-tech industry output value (unit: %)
		Number of patents granted per capita
		Total factor productivity (technical progress TC) (unit: %)
Control variable	Government revenue	General budget revenue/GDP (unit: CNY10,000/per captia)
	Financial market activity	Price adjusted per capita stamp revenue (unit: CNY100/per captia)
	Urban rural gap	Per capita consumption expenditure in urban/rural areas (unit: %)
	Degree of opening up	total imports and exports/GDP (unit: %)

Table 4. Descriptive statistical results

Variable code	Variable name	Minimum value	maximum value	mean value	standard deviation
value	Quality of economic growth	−1.38	4.70	0.00	0.95
fdi	foreign direct investment	0.80	220.66	39.29	44.23
odi	Outward direct investment	0.00	181.43	5.45	15.74
job	Employment effect index	−2.63	2.43	0.00	0.72
output	Output efficiency index	−1.70	4.90	0.00	1.16
tech	Technology spillover index	−1.39	3.92	0.00	0.92
gov	Government revenue	0.03	1.62	0.27	0.29
sec	Financial market activity	0.01	2.6	0.31	0.39
ur	Urban rural gap	1.59	7.2	2.90	0.73
open	Degree of opening up	0.02	1.59	0.29	0.35

Table 5. Main effect regression results of full sample

variable	value	variable	value
fdi	0.007189***	odi	0.011362***
	(3.09)		(6.84)
gov	0.7963763**	gov	0.5633327**
	(2.23)		(3.71)
sec	0.6417909**	sec	0.4379969**
	(2.55)		(3.19)
ur	0.0344234	ur	0.0155521
	(1.32)		(0.51)
open	0.0275619**	open	0.3509627**
	(0.12)		(1.57)
_cons	−1.077191***	_cons	−0.9032473***
	(−8.17)		(−8.01)
rho	0.76296501	rho	0.79729694
N	465	N	465
R^2	0.8462	R^2	0.8478

*, * *, and *** represented significance levels of 10%, 5% and 1% respectively. Regression coefficient was shown in the table, and T value was shown in brackets.

Table 6. Test results of mediating effect of whole sample

Core variable	FDI			ODI
Intermediary variable	Employment effect	Output efficiency	Technology spillover	Employment effect	Output efficiency	Technology spillover
Step1: main effect c	0.007189*** (3.09)			0.011362*** (6.84)
Step2: coefficient a	0.00867*** (3.42)	0.00699*** (3.6)	0.00706** (2.14)	−0.0007 (−0.30)	0.0047*** (2.23)	0.0083*** (3.67)
Step2: coefficient b	0.0837 (1.12)	0.4019*** (4.05)	0.4911*** (7.86)	0.1965*** (2.78)	0.4044*** (5.10)	0.4631*** (8.45)
Step2: coefficient c ‘	0.00646*** (2.84)	0.00438** (2.36)	0.00372** (3.24)	0.0115*** (7.74)	0.0094*** (5.10)	0.0075*** (6.03)
Step3: bootstrap test	[0.0274 0.0424]	/	/	[0.0068 0.0122]	/	/
Step4: Is there a mediating effect	Yes	Yes	Yes	Yes	Yes	Yes
Step5: Proportion of intermediary effect	10.14%	39.07%	48.25%	−1.21%	16.90%	35.40%

*, **, and *** represented significance levels of 10%, 5% and 1% respectively. The results of Bootstrap test were adjusted by PC.

Table 7. Test results of mediating effect in Eastern

Core variable	FDI			ODI
Mediating variable	Employment effect	Output efficiency	Technology spillover	Employment effect	Output efficiency	Technology spillover
Main effect C	0.0125702***			0.0103735***
	(4.96)			(8.56)
Step2: coefficient a	0.00377	0.00687*** (3.43)	0.01701***	0.001	0.0029	0.0076***
	(1.15)		(3.7)	(0.37)	(1.05)	(3.4)
Step2: coefficient b	0.3022***	0.3226	0.4072***	0.3533***	0.4465**	0.4325***
	(4.34)	(1.18)	(5.04)	(3.28)	(2.27)	(6.63)
Step2: coefficient c^’	0.01143*** (4.63)	0.01035*** (4.06)	0.00564** (2.74)	0.0100*** (7.33)	0.0090***	0.0071*** (7.33)
					(4.84)
Bootstrap test	[0.0142 0.0654]	[0.1240	/	[−0.003 0.0208]	[0.0111 0.0310]	/
		0.2594]
Mediating effect results	9.07%	17.70%	55.13%	No mediating effect results	13.20%	31.70%

*, * *, and *** represented significance levels of 10%, 5% and 1% respectively.

Table 8. Test results of mediating effect in Central

Core variable	FDI			ODI
Mediating variable	Employment effect	Output efficiency	Technology spillover	Employment effect	Output efficiency	Technology spillover
Main effect c	−0.01141474			0.0953559**
	(−0.55)			−2.73
Second step coefficient a	/			−0.0077 (−0.30)	0.0489 (1.62)	0.0855* (2.14)
Second step coefficient b	/			0.0743 (0.63)	0.5041* (2.15)	0.5599*** (4.3)
Second step coefficient c^’	/			0.0959** (2.65)	0.0707** (2.73)	0.0475* (2.17)
Bootstrap test	/			[−0.0213 0.2582]	[0.0126 0.2568]	/
Mediating effect results	/			No mediating effect results	25.80%	50.20%

*, * *, and *** represented significance levels of 10%, 5% and 1% respectively.

Table 9. Test results of mediating effect in Western

Core variable	FDI			ODI
Mediating variable	Employment effect	Output efficiency	Technology spillover	Employment effect	Output efficiency	Technology spillover
Main effect c	0.0083409*** (3.66)			−0.0046968 (−0.22)
Second step coefficient a	0.00895** (3.15)	0.01009** (2.32)	0.00044 (0.11)	/
Second step coefficient b	0.1412 (1.22)	0.2833** (2.63)	0.4237*** (4.88)	/
Second step coefficient c^’	0.00707** (2.68)	0.00548*** (3.29)	0.00815*** (5.61)	/
Bootstrap test	[0.0147 0.0901]	/	[0.0651 0.1345]	/
Mediating effect results	15.20%	34.30%	2.28%	/

*, * *, and *** represented significance levels of 10%, 5% and 1% respectively.

Table 10. Test results of mediating effect in Northeast

Core variable	FDI			ODI
Mediating variable	Employment effect	Output efficiency	Technology spillover	Employment effect	Output efficiency	Technology spillover
Main effect c	0.00280044			0.0220558
	(2.09)			(0.89)

*, * *, and *** represented significance levels of 10%, 5% and 1% respectively.

Table 11. Test results of comprehensive mediating effect

Region	FDI			ODI
	Employment effect	Output efficiency	Technology spillover	Employment effect	Output efficiency	Technology spillover
Full samples	0.007189*** (3.09)			0.011362*** (6.84)
	10.14%	39.07%	48.25%	−1.21%	16.9%	35.4%
East region	0.0125702*** (4.96)			0.0103735*** (8.56)
	9.07%	17.7%	55.13%		13.2%	31.7%
Central region	−0.0114147 (−0.55)			0.0953559** (2.73)
					25.8%	50.2%
West region	0.0083409*** (3.66)			−0.0046968 (−0.22)
	15.2%	34.3%	2.28%
Northeast region	0.0028004 (2.09)			0.0220558 (0.89)

*, * *, and *** represented significance levels of 10%, 5% and 1% respectively.

Table 12. Regression results of instrumental variable method

	FDI					ODI
IV equation		Full samples	Employment effect	Output efficiency	Technology spillover	Full samples	Employment effect	Output efficiency	Technology spillover
L.IV		−0.0147	−0.0119	−0.0118	−0.0153**	−0.086*	−0.057*	−0.055*	−0.073*
		(−1.6)	(−1.4)	(−1.5)	(−2.1)	(−1.9)	(−1.8)	(−1.9)	(−1.9)
fdi\		0.02820***	0.02023**	0.01782**	0.02280***	0.0899**	0.0645**	0.0586**	0.0731**
odi		(2.93)	(2.19)	(2.06)	(2.93)	(2.3)	(2.36)	(2.39)	(2.12)
job			0.4171**				0.6220**
			(7.51)				(9.51)
outpour				0.6045***				0.7684***
				(10.3)				(9.87)
tech					0.6527***				0.5478***
					(13.8)				(5.14)
gov		1.229***	0.9188***	0.2656	0.0832	0.2966	−0.184	−0.860*	−0.545
		(7.37)	(6.01)	(1.6)	(0.54)	(0.51)	(−0.4)	(−1.8)	(−1.3)
sec		0.6122***	0.5535	0.2080*	0.3171***	0.3904	0.2473	−0.12	0.2173
		(4.29)	(4.34)	(1.7)	(2.8)	(1.59)	(1.36)	(−0.7)	(1.09)
ur		−0.289***	−0.123***	−0.173***	−0.272***	−0.570***	−0.240***	−0.306***	−0.480***
		(−8.2)	(−3.07)	(−5.3)	(−9.7)	(−5.9)	(−3.6)	(−5.4)	(−5.4)
open		0.044	−0.282*	−0.437***	0.2612	1.2437***	0.6646**	0.3518	1.125***
		(0.25)	(−1.68)	(−2.7)	(1.86)	(2.69)	(2.06)	(1.23)	(2.84)
Fixed effect		Control	Control	Control	Control	Control	Control	Control	Control
Number of Provinces		31	31	31	31	31	31	31	31
N		403	403	403	403	403	403	403	403
R^2		0.8465	0.8743	0.8865	0.9023	0.5108	0.7404	0.7771	0.6594

*, * *, and *** represented significance levels of 10%, 5% and 1% respectively.

Table 13. Robustness test

samples	Replace variable		Bootstrap sampling
	FDI	ODI	FDI	ODI
Full samples	0.0068128***	0.0117465***	0.0071890***	0.011362***
	(2.78)	(5.00)	(5.37)	(5.51)
Eastern region	0.0141749*** (4.53)	0.0118277***	0.0125702***	0.0103735***
		(12.1)	(6.06)	(4.27)
Central region	−0.0032052	0.1011927*** (3.97)	−0.0114147	0.0953559*** (4.22)
	(−0.19)		(−1.16)
Western region	0.0066461**	−0.0021438	0.0083409*** (3.06)	−0.0046968
	(2.28)	(−0.10)		(−0.33)
Northeast region	0.007485**	0.0119022	0.0028004	0.0220558
	(5.05)	(0.33)	(1.23)	(0.67)

*, * *, and *** represented significance levels of 10%, 5% and 1% respectively.