Spatial polarization and dynamic pathways of Foreign Direct Investment in China 1990–2009

► This paper analyses the recent trends, features, and patterns of FDI in China. ► We portray the determining factors of FDI and their dynamic paths in China. ► There are unique and dynamic paths of the spatial evolution of FDI in China. ► The high value-added FDI arrives/concentrates in the traditional investment regions. ► Significant FDI into the manufacturing sector has made China ‘the World Factory’. The spatial and sectoral distribution of Foreign Direct Investment (FDI) in China has changed dramatically in the past two decades. FDI was largely concentrated in the Pearl River Delta (PRD) and other Southern Coastal provinces in early stages and shifted to the Yangtze River Delta (YRD) and the Bohai Economic Rim (BER) sequentially in later stages. It created unique and dynamic paths of the spatial evolution of FDI in China. Although many provinces have received relatively more FDI since the late 2000s, Guangdong and Jiangsu are still the two major recipients of FDI in China, demonstrating and over-arching polarization process. Furthermore, most FDI in China has been in the manufacturing sector, making China well-known as the “World Factory of Manufacturing”. This paper analyses the most recent trends, characteristics and patterns of FDI in China. It portrays the factors that determined the investment location and the dynamic pathways of different kinds of FDI. This paper also foresees the possible changes in spatial and sectoral distribution of FDI in the near future and provides policy suggestions for both China and other developing countries in seeking new FDI inflows and transforming their industrial structures and economies in this particular phase of globalization.