Research on World Agricultural Economy

Research on the Influence of Foreign Investment in Chinese Agriculture on Rural Economic Development

Zhibin Jia

Faculty of Business and Accountancy, Lincoln University College, Petaling Jaya 47301, Malaysia

Abhijit Ghosh

Faculty of Business and Accountancy, Lincoln University College, Petaling Jaya 47301, Malaysia

Meiqian Liu

Huijunfeng (Shenzhen) Holding Management Co. Ltd., Shenzhen 518000, China

DOI: https://doi.org/10.36956/rwae.v6i3.1382

Received: 11 October 2024 | Revised: 16 December 2024 | Accepted: 20 December 2024 | Published Online: 23 June 2025

---

Abstract

The issue of agriculture, rural areas, and farmers is a fundamental issue that affects the country's economy and people's livelihood. The economic development of rural areas is one of the priorities of economic and social development, and the issue of the “three rural issues” is receiving increasing attention. This research examines the multifaceted impact of Foreign Direct Investment (FDI) on China's agricultural sector from 2000 to 2020. Employing a mixed-methods approach, including panel data analysis, structural equation modeling, and spatial econometrics, the study investigates FDI's influence on agricultural productivity, rural employment, income distribution, technological innovation, and environmental sustainability. Results indicate that FDI has generally positively affected these aspects, with a 1% increase in FDI associated with a 0.15% rise in agricultural Total Factor Productivity and a 0.3% increase in rural per capita income. However, benefits are unevenly distributed across regions and income groups. FDI significantly boosts agricultural innovation, with a 10% increase linked to a 7.5% rise in patent applications. Environmental impacts are mixed, showing reduced pollution intensity but increased water usage in FDI-intensive areas. The study highlights the need for targeted policies to maximize FDI benefits while addressing regional disparities and environmental concerns.

Keywords: Foreign Direct Investment; Agricultural Development; Rural Economy; Technological Innovation; Environmental Sustainability; China

---

References

[1] Amin, S.B., Amin, Y.N., Khandaker, M.K., et al., 2022. Unfolding FDI, renewable energy consumption, and income inequality nexus: heterogeneous panel analysis. Energies. 14(15), 1–21. DOI: https://doi.org/10.3390/en15145160

[2] Arrow, K.J., 1962. The economic implication of learning by doing. Review of Economics and Statistics. 29(3), 155–173. DOI: https://doi.org/10.2307/2295952

[3] Atkinson, A.B., Brandolini, A., 2003. Promise and pitfalls in the use of "secondary" data-sets: income inequality in OECD countries as a case study. Journal of Economic Literature. 39, 771–799. DOI: https://doi.org/10.1257/jel.39.3.771

[4] Bayar, Y., Diaconu, L., 2022. FDI inflows, human development and export upgrading: Evidence from EU transition economies. Eastern Journal of European Studies. 13(2), 5-23. DOI: https://doi.org/10.47743/ejes-2022-0201

[5] Bhat, M.N., Ikram, F., Rahman, M.N., 2023. Foreign direct investment and imports in India: exploring institutional dimensions. Journal of the Knowledge Economy. 15, 1386–1417. DOI: https://doi.org/10.1007/s13132-023-01136-9

[6] Chen, C., 2016. The impact of foreign direct investment on urban-rural income inequality: evidence from China. China Agricultural Economic Review. 3, 480–497. DOI: https://doi.org/10.1108/CAER-09-2015-0124

[7] Chen, W., Wei, N., Hou, J., et al., 2018. An empirical study on the "threshold effect" in the relationship between foreign direct investment and regional innovative capability. Soft Science. 09, 30–33+38. DOI: https://doi.org/10.13956/j.ss.1001-8409.2018.09.07

[8] Deng, F., Yang, L., Gong, Q., et al., 2021. Evaluation of high-quality economic development based on entropy weight method: taking Chengdu-Chongqing city agglomeration as example. Proceeding of the 4th International Conference on Computers in Management and Business; (Jan 30 - Feb 01, 2021); Singapore, Singapore. pp. 41–47.

[9] Fan, C.S., Hu, Y., 2007. Foreign direct investment and indigenous technological efforts: evidence from China. Economics Letters. 96(2), 253–258. DOI: https://doi.org/10.1016/j.econlet.2007.01.011

[10] Fang, W.W., 2022. The goals and path of realizing the high-level self-reliance in science and technology in China. Nanjing Journal of Social Sciences. 07, 41–49+102. DOI: https://doi.org/10.15937/j.cnki.issn1001-8263.2022.07.005

[11] Godil, D.I., Sharif, A., Rafique, S., et al., 2020. The asymmetric effect of tourism, financial development, and globalization on ecological footprint in Turkey. Environmental Science and Pollution Research. 27(32), 40109–40120. DOI: https://doi.org/10.1007/s11356-020-09937-0

[12] Goldberg, L.S., Klein, M.W., 1999. International trade and factor mobility: An empirical investigation. Social Science Electronic Publishing. 47(7196), 321–335. DOI: https://doi.org/10.2139/ssrn.171077

[13] Hair, J.F., Hult, G.T.M., Ringle, C.M., et al., 2014. A primer on partial least squares structural equation modeling, 3rd ed. Sage Publications: New York, USA.

[14] Hair, J.F., Risher, J.J., Sarstedt, M., et al., (2019). When to use and how to report the results of PLS-SEM. European Business Review. 31(1), 2–24. DOI: https://doi.org/10.1108/EBR-11-2018-0203

[15] Hirschman, A., 1958. The strategy of economic development, 1st ed. Yale University Press: London, England.

[16] Hong, R.J., Tu, Q.N., 2023. The impact of foreign direct investment on the high-quality development of the Yangtze River Economic Belt—empirical study on the mediation effect based on industrial structure upgrading. China Journal of Commerce. 07, 138–141. DOI: https://doi.org/10.19699/j.cnki.issn2096-0298.2023.07.138

[17] Hong, Y.X., 2022. New Chinese path to modernization by implementing the new development concept. Economist. 11, 5–12. DOI: https://doi.org/10.16158/j.cnki.51-1312/f.2022.11.014

[18] Hu, A., Yan, Y., Tang, X., 2018. Xi Jinping's new development philosophy. Springer: New York, USA.

[19] Hymer, S.H., 1960. The international operations of national firms: a study of direct investment. MIT Press: Massachusetts, USA.

[20] Jahanger, A., 2021. Influence of FDI characteristics on high-quality development of China's economy. Environmental Science and Pollution Research. 28(15), 18977–18988. DOI: https://doi.org/10.1007/s11356-020-09187-0

[21] Jahanger, A., Usman, M., Ahmad, P., 2022. Investigating the effects of natural resources and institutional quality on CO2 emissions during globalization mode in developing countries. International Journal of Environmental Science and Technology. 20, 9663–9682. DOI: https://doi.org/10.1007/s13762-022-04638-2

[22] Jiang, X.J., Meng, L.J., 2021. Mainly inner circulation, outer circulation empowerment and higher level double circulation: international experience and Chinese practice. Journal of Management World. 1, 1–19.

[23] Jin, B., 2018. Study on the "high-quality development" economics. China Industrial Economics. 04, 5–18. DOI: https://doi.org/10.19581/j.cnki.ciejournal.2018.04.001

[24] Johnson, H.G., 1970. The efficiency and welfare implication of the international corporation. MIT Press: Massachusetts, USA.

[25] Kojima, K., 1977. Kiyoshi Kojima, Kaigai Chokusetsu Toshi Ron, the theory of foreign direct investment. Journal of Yamaguchi Economics. 27(5-6), 429-436.

[26] Kugler, M., 2006. Spillovers from foreign direct investment: within or between industries? Journal of Development Economics. 80(2), 444–477. DOI: https://doi.org/10.1016/j.jdeveco.2005.03.002

[27] Li, C., Wan, J., Xu, Z., et al., 2021. Impacts of green innovation, institutional constraints and their interactions on high-quality economic development across China. Sustainability. 13(9), 5277. DOI: https://doi.org/10.3390/su13095277

[28] Li, X., Lu, Y., Huang, R., 2021. Whether foreign direct investment can promote high-quality economic development under environmental regulation: evidence from the Yangtze River Economic Belt, China. Environmental Science and Pollution Research. 28, 21674–21683. DOI: https://doi.org/10.1007/S11356-020-12032-Z

[29] Lin, T., Chen, H.W., Zhong, C.B. (2023). Foreign direct investment and industrial structure optimization and upgrading-based on the moderating role of digital inclusive Finance. Productivity Research. 03, 31–35+108+161. DOI: https://doi.org/10.19374/j.cnki.14-1145/f.2023.03.007