HKDIHong Kong Design Institute
HKDIHong Kong Document of Identity
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The above discussion of sectoral distributions also suggests that the USDI is likely to be different from HKDI in technology and size of projects.
commitments to the metropolitan (32% of total projects) are 2.7 times as large as HKDI (12%), whereas U.S.
The preceding discussions of the theory and USDI pattern in comparison with HKDI suggest that low USDI might be a result of two broad sets of factors.
The above reasoning, along with the discussions of theory and USDI pattern, suggests a hypothesis and determinants of USDI and HKDI as follows:
Hypothesis: USDI in China basically is oriented toward the domestic market, while HKDI has export-oriented characteristics.
(b) Labor costs: China's cheap labor should encourage FDI, especially those with labor-intensive production such as HKDI. (c) Trade barriers: Higher import tariffs would reduce export-oriented FDI but induce market-oriented FDI.
Correspondingly, two models are specified for the determination of USDI and HKDI as follows:
[HKDIR.sub.t], = ratio of HKDI flows in China to FDI in all developing countries in year t; [6]
[WAGEASIAR.sub.t], = ratio of China's real wage to the average real wage of selected Asian countries in year t [7] (the expected sign is negative with HKDI);
[TARIFFR.sub.t], = ratio of China's tariff rate to the average tariff rate of selected Asian countries in year t [8] (the expected sign is positive with USD1 and negative with HKDI);
D3 = dummy for tax incentives aimed to export-oriented FDI: D3 = 1 for 1986-97, and D3 = 0 for the rest (a positive sign is expected with HKDI);
Second, the symmetric sets of independent variables except Dl and D3 are employed in the models for USD1 and HKDI to see how differently the U.S.