China’s Tourism-Led Foreign Direct Investment Inflows: An Empirical Study

Abstract

Based on the annual data of China from 2000 to 2014, this paper applies the dynamic panel model to study the relationship between inbound tourism and foreign direct investment (FDI). Compared with previous literatures, our analysis is not limited to the study of FDI in single tourism sectors such as hotels and restaurants, but takes general FDI into consideration. The empirical results show that the growth of inbound tourism can not only promote FDI flow into the tourism industries, but also increase the inflows of FDI to other sectors. In other words, the flourished inbound tourism may have spillover impacts of FDI on non-tourism sectors. It’s also indicated that the two policies of inbound tourism improvement and inward FDI promotion are complementary. Therefore, I believe coordination can maximize the effect of policies, because the two policies may coordinate with each other to achieve economic growth targets.