Role of human capital on regional distribution of FDI in China: New evidences

- Novelty of the paper: use of six human capital indices: endowment, utilization, demography, productivity, support and health.
- Important factors are availability of present (endowment) and future (demography) supply of human resources.
- Health of labor force and quality of people working in scientific and technical fields were also found to be significant.
- Furthermore, local market size, infrastructure and location (being in coastal region) are significant determinants.
- Western region, compared to central and northeastern regions, is losing the most to eastern region.

This paper investigates the regional distribution of FDI in China with a focus on human capital from completely different and unique measurement. The novelty is the use of a set of six human capital indices: endowment, utilization, demography, productivity, support and health. It uses panel data estimation for 31 regions of China for 2002-2013 with the consideration of usual determinant variables in FDI study. The results suggest that foreign investors value the availability of human resources, both in terms of present (endowment) and future (demography) supply, as the most important factor in making their investment decisions. Health of labor force and quality of people working in scientific and technical fields were also found to be significant. Furthermore, local market size, infrastructure and location (being in coastal region) are significant determinants with western region, compared to central and northeastern regions, losing out the most to eastern region.