R&D activities and FDI in China's iron ore mining industry

Sun, Sizhong;Anwar, Sajid

Abstract

In recent years, the Chinese government has committed additional resources in promoting research and development (R&D). At the same time, China has started implementing a more targeted foreign direct investment (FDI) policy. Using firm level panel data from China's iron ore mining industry, this paper aims to evaluate the performance differences between the firms that undertake R&D and those who do not. We also examine the role of FDI, which has not been the subject of an in-depth investigation. In addition, we use a relatively recently developed coarsened exact matching technique. We find that domestic firms in China's iron ore mining industry that conduct R&D are on average 0.3937% more productive and their sales are 0.0253% higher. While this industry attracts less than 1% of the total FDI in China, FDI has a positive and sizable impact on both productivity and profitability of domestic firms in China's iron ore mining industry. The results presented in this paper suggest that investment in China's iron ore mining industry offers attractive returns to foreign investors.

Journal

Economic Analysis and Policy

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0313-5926

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Economic Society of Australia

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DOI

10.1016/j.eap.2019.01.003