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Regional Capital Flows and Economic Regimes: Evidence from China

Using provincial data from China, this paper examines the pattern of capital flows in relation to the transition of economic regimes. We show that fast-growing provinces experienced less capital inflows before the large-scale market reform, contrary to the prediction of the neoclassical growth theory. As China transitioned from the central-planning economy to the market economy, the negative correlation between productivity growth and capital inflows became much less pronounced. From a regional perspective, this finding suggests domestic institutional factors play an important role in shaping the pattern of capital flows.

15. April 2016

Authors Liuchun Deng Boqun Wang

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Professor Liuchun Deng, PhD
Professor Liuchun Deng, PhD

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