Tax incentives and foreign direct investment in China.

The preferential tax policies for foreign direct investment (FDI) in China were terminated by a tax reform in 2008. This article uses the provincial-level panel data for 1998‒2008 before the reform in order to study whether the tax incentive had been a significant determinant of foreign investment decisions. We find that market size and geographic location had significant impacts on the FDI inflow into China but the tax incentive policies were not a sufficient determinant of FDI inflow into China over the periods studied, which provides a rationale for the termination of the tax incentives in FDI at 2008 reform in China. [ABSTRACT FROM AUTHOR]