Abstract/Summary

This paper uses a network approach and a negative binomial regression model (NBRM) to shed light on the association between Domestic Investment (DI) and Foreign Direct Investment (FDI) in interlinking Chinese cities in a space of flows. The empirical analysis is based on 2743 FDI and 9315 DI projects covering 77 Chinese cities. We address the question of what is the association between DI network measures and city attractiveness for FDI, and does the geographic distance of DI matter? While the physical distance of DI activity is found to have a negative association with FDI, city functional proximity and structural position in the DI network are found to have a positive association. We conclude that strategic policies to stimulate cross-territorial economic ties between Chinese cities should be advantageous in attracting inward foreign investment.