FDI and market entry/exit: Evidence from China

► The link between FDI in China and entry/exit rate of domestic firms is explored. ► FDI (excluding from Hong Kong, Macau and Taiwan) encourages entry of domestic firms. ► FDI related backward linkages encourage entry of domestic firms in China. ► FDI originating from Hong Kong, Macau and Taiwan does not encourage domestic entry. ► FDI from Hong Kong, Macau and Taiwan increases the exit rate of domestic firms.