Does International Investment Help Poverty Reduction in China?

This study analyzes effects of international investment on poverty reduction in China by testing a growth model with provincial data. Economic growth is the single most important factor influencing poverty reduction. Inward foreign direct investment (FDI) seems central to achieving that goal because it is a key ingredient for successful growth in China. FDI might reduce poverty through promoting economic growth and diffusing growth widely. Results of cross-section and panel estimates suggest that FDI is indeed an important source of China's economic growth and therefore a powerful force for poverty reduction. The more poverty could be reduced through government-led programs and polices that improve poor provinces' investment environments the more FDI is attracted.