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Innovation and Structural Change
Foreign Direct Investments
China
A decade ago few economists would have been surprised at the idea that Chinese research capability was evolving in standard textbook style. Chinese innovations ‘piggybacked’ on Western-based innovation mainly through the ubiquity of machines and equipment imported from Western economies. Such are (or rather were) the rules of the game. Using data for 2001 to 2008, we find that although FDI may once have fuelled technological advancement, it has lost ground to domestic financing channelled within a stronger and ever-improving Chinese financial system.
