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The literature has shown that social networks can promote international trade and investment by acting as a substitute for formal market institutions. The question to what degree strengthening formal institutions affects the role of social networks has yet to be addressed empirically. Using cross-sectional data this paper examines whether the role of ethnic Chinese networks in promoting bilateral FDI inflows into China diminishes as China continues to implement legal, economic and political reforms. The findings are ambiguous; while results for the entire period (1984-2003) suggests that, if anything, the role increases, a look at a more recent sub-period (1992-2003) suggest that the role does as expected decrease.

HT_China_Table1.xls (21 kB)



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