El impacto de la inversión extranjera china en el crecimiento económico de Perú
| Autor | María Osterloh Mejía/Nadia Urriola Canchari/Xiangzheng Deng |
| Cargo | Centro de Estudios Asiáticos, Universidad Nacional de San Marcos/Instituto de Ciencias Geográficas y Recursos Naturales, Academia China de Ciencias/Instituto de Ciencias Geográficas y Recursos Naturales, Academia China de Ciencias |
| Páginas | 32-47 |
Latin American Journal of Trade Policy 6 (2020) – ISSN 079-9668 – Universidad de Chile
32
The impact of Chinese Foreign Direct Investment on economic growth of
Peru: a short and long run analysis
Nadia Urriola Canchari*
María Osterloh Mejía**
Xiangzheng Deng
Abstract
Since 2000, the Peruvian economic policy presented a positive impact on the economic growth thanks
to Foreign Direct Investment (FDI) increase and the inclusion of foreign markets in the local economy.
This study analyzes and quantifies the short and long-run impact of FDI and Foreign Direct Investment
from China (FDICH) on economic growth in Peru, using annual time series data from 2001 to 2018
obtained from the Central Bank of Peru and the World Bank. Vector Autoregression (VAR) Model,
Augmented Dickey-Fuller test, Johansen Co-integration test, and Granger Causality test were employed
for data analysis through the production function. The findings revealed the impact and significance of
FDI and FDICH in the short and long-run, which were positive and significant. Moreover, the Co-
integration test (for long-run relationship) was positive, and the causality test in the relationship between
all variables and the economic growth revealed the directionality of these links.
Keywords: Chinese Foreign direct investment, Peru, Economic growth, Inflation rate, VAR model
Resumen
Desde 2000, la política económica peruana presentó un impacto positivo en el crecimiento económico
gracias al aumento de la Inversión Extranjera Directa (IED) y la inclusión de los mercados extranjeros
en la economía local. Este estudio analiza y cuantifica el impacto a corto y largo plazo de la IED y la
Inversión Extranjera Directa de China (IEDCH) en el crecimiento económico de Perú, utilizando datos
de series temporales anuales de 2001 a 2018 obtenidas del Banco Central del Perú y el Banco Mundial.
El modelo de autorregresión vectorial (VAR), la prueba de Dickey-Fuller aumentada, la prueba de
cointegración de Johansen y la prueba de causalidad Granger se emplearon para el análisis de datos a
través de la función de producción. Los resultados revelaron el impacto y la importancia de la IED y la
IEDCH a corto y largo plazo, que fueron positivos y significativos. Además, la prueba de cointegración
(para una relación a largo plazo) fue positiva, y la prueba de causalidad en la relación entre todas las
variables y el crecimiento económico reveló la direccionalidad de estos vínculos.
Palabras clave: Inversión extranjera china, Perú, Crecimiento económico, tasa de inflación, Modelo
VAR
* Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Science, Beijing, China. Email:
nadiaurriola2@hotmail.com Received: December, 18th 2019; modifications: March, 14th 2020; accepted:
** Researcher at the Center of Asian Studies of San Marcos National University, Lima, Peru.
Institute of Geog raphic Sciences and Natural Resources Research, Chinese Academy of Science, Beijing, China.
Nadia Urriola Canchari, María Osterloh Mejía and Xiangzheng Deng
The impact of Chinese Foreign Direct Investment on economic growth of Peru: a short and long run analysis
33
Introduction
Globalization can be defined as the expansion of the economic activities between nations without any
political boundary, with a network of economic, cultural, social and political interconnections (Yeates,
2001; Shahzad, 2006). However, it is still under debate the understanding of its relationship with human
welfare. Since globalization covers a wide array of economic activities, including international trade,
international migration, and international investment, it makes, from an international point of view,
economic growth a measurement of countries' welfare (Susilo, 2018). According to UNCTAD World
Investment Report (2012), developing countries are continuously striving for rapid economic growth,
promoting foreign investment attraction. Furthermore, new investment policies are characterized by the
recognition of investment as a primary driver of economic growth.
Hence, for developing economies, Foreign Direct Investment (FDI) and trade are usually considered
catalysts for economic growth (Makki & Somwaru, 2004). FDI is a vehicle of technology transfer from
developed to developing countries, stimulating them to improve the human capital force and its
institutions. According to Hill (2005), FDI reduces gaps in management, entrepreneurship, and
technology through spillovers and other externalities, facilitating the production or marketing of a
product in two different forms: Multinational enterprises (MNEs) or Multinational corporations (MNCs).
Those corporations usually improve the foreign exchange in the host country, and in a long-run
perspective, it may reduce the foreign exchange earnings (Stoner, Freeman, & Gilbert, 2001).
Studies about the impact of FDI on economic growth showed a positive relationship between them, but
its degree depends on the level of domestic infrastructure, domestic investment, and macroeconomic
stability (Ram & Zhang, 2002; Adegbite & Ayadi, 2011; Ali & Hussain, 2017). Furthermore, the literature
showed a debate about the role of FDI on economic growth as well as the importance of economic and
institutional development in fostering FDI (Dondeti & Mohanty, 2007). However, there is no consensus
between different authors regarding the impact of FDI on economic growth. On one side, Solow (1957)
and De Mello (1997), argue that FDI only affects the income level and it does not have an impact on
long-run growth, which depends only on population growth and technological advances. So, FDI will
have a long-term impact if the technology level improvement remains constant and positive. On the
other side, other researchers affirm that FDI can alter economic growth as it increases returns in
production through externalities effects, and it is an important human capital and technological transfer
mechanism, introducing new management and providing labor training facilities (Farrell, 2008; John,
2016). According to Akinlo (2004) and Louzi & Abadi (2011), FDI contribution in the host country is
not relevant on the long term. Countries that promote a policy of export promotion rather than import
substitution become stronger as effect of the FDI. Its impact on analyzed countries is higher than the
domestic capital investment, demonstrating that FDI is one of the economic driving force
(Balasubramanyam, Salisu & Sapsford, 1996; Borensztein, De Gregorio & Lee, 1998).
Based on these arguments, industrialized and developing countries have offered incentives to encourage
FDI in their economies. Recently, the special merits of FDI and particularly the kinds of incentives
offered to foreign firms in practice have begun to be questioned for the consequences in the environment.
This debate is fostered by ambiguous empirical evidence, at both the micro and macro levels, regarding
FDI generation of positive spillovers for host countries. In the next section, it will be explained the
importance of the Chinese investment in Peru.
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