Abstract
Foreign direct investment in real estate development (FDIRE) in China has been disproportionately agglomerated in the coastal region while has considerably diffused to some inland provinces along the Yangtze River. There is also significant spatial autocorrelation in the provincial distribution of FDIRE. Controlling for the spatial effects, statistical analysis indicates that FDIRE follows their international customers to China and pursues local profit opportunities as well. They avoid high financing cost and labor cost provinces but favor provinces with higher housing prices. FDIRE in China responds to the provincial differences in land and housing commercialization, and demands good regional governance, strong law enforcement and developed services. The findings imply that foreign investors in China’s real estate industry stress returns to capital while appreciate the conducive institutions when choosing locations.
Similar content being viewed by others
References
Aliber R (1970) A theory of direct foreign investment. In: Kindleberger CP (eds) The international corporation: a symposium. MIT, Cambridge, pp 17–34
Anselin L (1995) Local indicators of spatial association-LISA. Geogr Anal 27(2): 93–115
Bagchi-Sen S (1995) FDI in US producer services: a temporal analysis of foreign direct investment in the finance, insurance and real estate sectors. Reg Stud 29: 159–170
Bardhan A D, Kroll C A (2007) Globalization and real estate: issues, implications, opportunities, Research Report 0407, Fisher Center for Real Estate & Urban Economics. University of California, Berkeley
Campa J M (1993) Entry by foreign firms in the United States under exchange rate uncertainty. Rev Econ Stat 75(4): 614–622
Cheng S (2006) The role of labor cost in the location choices of Japanese investors in China. Pap Reg Sci 85: 121–138
Cheng S, Stough RR (2006) Location decisions of Japanese new manufacturing plants in China: a discrete-choice analysis. Ann Reg Sci 40: 369–387
Cheng LK, Kwan YK (2000) What are the determinants of the location of foreign direct investment: the Chinese experience. J Int Econ 51: 379–400
Du J, Lu Y, Tao Z (2008) FDI location choice: agglomeration vs institutions. Int J Finance Econ 13: 92–107
Dunning JH, Kundu SK (1995) The internationalization of the hotel industry: some new findings from a field study. Manag Int Rev 35: 101–133
Edgington DW (1996) Japanese real estate investment in Canadian cities and regions, 1985–1993. Can Geogr 40: 292–305
Ford DA, Fung H, Gerlowski DA (1998) Factors affecting foreign investor choice in types of U.S. real estate. J Real Estate Res 16: 99–111
Froot KA, Stein JC (1991) Exchange rates and foreign direct investment: an imperfect capital markets approach. Q J Econ 106(4): 1191–1217
Fung H, Huang G, Liu Q, Shen X (2006) The development of the real estate industry in China. Chin Econ 38: 84–102
Fu J (2000) Institutions and investments: foreign direct investment in China during an Era of reforms. The University of Michigan Press, Ann Arbor
Gerlowski DA, Fung H, Ford D (1994) The location of foreign direct investment for U.S. real estate: an empirical analysis. Land Econ 70: 286–293
He C, Fu R (2008) Foreign banking in China: a study of 279 branch units in 32 cities. Eurasian Geogr Econ 49: 457–480
He C (2006) Regional decentralization and location of foreign direct investment in China. Post-Communist Econ 18: 33–50
He C (2003) Location of foreign manufacturers in China: agglomeration economies and country of origin effects. Pap Reg Sci 82: 351–372
He C (2002) Information costs, agglomeration economies and the location of foreign direct investment in China. Reg Stud 36: 1029–1036
Ho SPS, Li GCS (2003) Emerging land markets in rural and urban China: policies and practices. China Q 175: 681–707
Holsapple EJ, Ozawa T, Olienyk J (2006) Foreign “direct” and “portfolio” investment in real estate: an eclectic paradigm. J Real Estate Portf Manag 12: 37–47
Hong J (2007) Firm specific effects on location decisions of foreign direct investment in China’s logistics industry. Reg Stud 41(5): 1–11
Huque AS (2005) Shifting emphasis in the role of the state: urban housing reform in China. Asian J Polit Sci 13: 53–74
Jiang D, Chen J, Isaac D (1998) The effect of foreign investment on the real estate industry in China. Urban Stud 35: 2101–2110
Kogut B, Chang SJ (1996) Platform investments and volatile exchange rates: direct investment in the US by Japanese electronic companies. Rev Econ Stat 78(2): 221–231
Kolstad I, Villanger E (2008) Determinants of foreign direct investment in services. Eur J Polit Econ 24: 518–533
Kundu SK, Contractor FJ (1999) Country location choices of service multinationals: an empirical study of the international hotel sector. J Int Manag 5: 299–317
Lee J, Zhu Y (2006) Urban governance, neoliberalism and housing reform in China. Pac Rev 19: 39–61
Li L (1999) Impacts of land use rights reform on urban development in China. RURDS 11: 193–205
Li L (2003) Economic reform in the urban land system in China. J Contemp China 12: 207–224
Li S, Park SH (2006) Determinants of locations of foreign direct investment in China. Manag Organ Rev 2: 95–119
Lin GCS, Ho SPS (2005) The state, land system and land development processes in contemporary China. Ann Assoc Am Geogr 95: 411–436
Luo Y (1997) Pioneering in China: risks and benefits. Long Range Plan 30: 768–776
Moshirian F, Pham T (2000) Determinants of US investment in real estate abroad. J Multinatl Financ Manag 10: 63–72
Newell G, Worzala E (1995) The role of international property in investment portfolios. J Prop Finance 6: 55–63
Qian Y, Weingast B (1997) Federalism as a commitment to market incentives. J Econ Perspect 11: 83–92
Rugman AM (1976) Risk reduction by international diversification. J Int Bus Stud 7(2): 75–80
Sirmans CF, Worzala E (2003) International direct real estate investment: a review of the literature. Urban Stud 40: 1081–1114
Sun Q, Tong W, Yu Q (2002) Determinants of foreign direct investment across China. J Int Money Finance 21: 79–113
United Nations Conference on Trade and Development (UNCTAD) (2004) World investment report 2004: the shift towards services, United Nations, New York, Geneva
Wang YP, Murie A (1996) The process of commercialization of urban housing in China. Urban Stud 33: 971–990
Wei Y, Liu X, Parker D, Vaidya K (1999) The regional distribution of foreign direct investment in China. Reg Stud 33: 857–867
Wu F (2001) China’s recent urban development in the process of land and housing marketization and economic globalization. Habitat Int 25: 273–289
Wu X, Strange R (2000) The location of foreign insurance companies in China. Int Bus Rev 9: 383–398
Xie Q, Parsa ARG, Redding B (2002) The emergence of the urban land market in China: evolution, structure, constraints and perspectives. Urban Stud 39(8): 1375–1398
Zhang Z (1996) Theory and practice in Chinese urban housing reform. In: Zhang Z et al (eds) Reform of Chinese housing system. Reform Press, Beijing (in Chinese)
Zhou Y (2006) Heterogeneity and dynamics in China’s emerging urban housing market: two sides of a success story from the late 1990s. Habitat Int 30: 277–304
Zhu J (2002) Urban development under ambiguous property rights: a case of China’s transition economy. Int J Urban Reg Res 26: 41–57
Zhu J (2005) A transitional institution for the emerging land market in urban China. Urban Stud 42(8): 1369–1390
Zhu J, Sim L, Zhang X (2006) Global real estate investments and local cultural capital in the making of Shanghai’s new office locations. Habitat Int 30: 462–481
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
He, C., Wang, J. & Cheng, S. What attracts foreign direct investment in China’s real estate development?. Ann Reg Sci 46, 267–293 (2011). https://doi.org/10.1007/s00168-009-0341-4
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00168-009-0341-4