FDI, Chinese foreign relationship and labour market – empirical evidence from China

Abstract

Combined with five research articles, this thesis aims to elaborate the ongoing investigations on Chinese economy in the field of its development studies with emphasis on its utilization of FDI including both inbound and outbound investment and labour market. From the 1st opium war a century ago, China was suffering from the un-unified sovereignty as a colonized country. Its economy and development were left far behind. After a century since that, the economic reform of China in 1978 has achieved great success in the sense that it enables China to become the most rapidly growing country and the second largest economy in the world. This opening up strategy, followed by a series of polices has made China one of the most favourite host countries for receiving FDI. As a result, the inward FDI can bring the benefit of economic growth for China on the one hand, but it has long been argued that it can also affect the labour allocation and income inequality on the other. How the previous Chinese-foreign relationship matters in the relationship between inward FDI and Chinese labour market and whether the FDI enlarges the income inequality as the literature suggested will be answered in the following chapters. Also, the China’s outward FDI has been increasing rapidly as China has gained important international status and increasingly played a more crucial role in international economy in recent years. What determines the Chinese outward FDI from a Chinese-foreign relationship (the cultural aspect) is the major motivation for another empirical research. The external factors such as FDI are important to understand the Chinese Economy. Yet, the internal factor such as rural labour transfer should not be neglected. Therefore, we also conduct 2 research papers on labour economics by investigating the rural labour on-farm transfer decisions and the role of grandparenting-life quality-life satisfaction. Therefore, this thesis consists two articles to illustrate the relationship between inward FDI and labour market and income inequality, respectively. In the 1st article, we show that the relationship between inward FDI and employment is affected by different previous colonial powers in either positive or negative ways due to the different institutions they may have left. In the 2nd paper, I revisit the relationship between inward FDI and vertical income inequality in China. I find that inward FDI should not be blamed for the increasing of income inequality in China as it should in some other cases. Next, we study the Confucius Institute and the Chinese outward FDI, the results of which provide evidence on how cultural familiarity ties China with the world and boots its outward FDI as placed in the 3th paper. The 4th empirical study looks into the Chinese labour market more specifically with major focus on the rural labour transfer. We find that different capital endowments play key roles on rural households’ on-farm transfer decisions. The last research article investigates the grandparenting-life quality-life satisfaction and shows that the grandparenting has a favourable effect on grandparents’ life quality and life satisfaction.