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China has experienced rapid economic growth and the recent Global Economic Projections 2004 by the World Bank suggest that there is a continuation of Chinese growth of at least 7 to 8 percent (World Bank, 2003). Nevertheless, on the background of rapid growth came increasing regional disparities. This paper uses the augmented Solow-Swan model of Mankiw, Romer and Weil (1992) to analyze data on provinces of China over the reform period 1978-2003. The main finding is that FDI has a positive and statistically significant impact on economic growth as theory predicts and the augmented Solow-Swan model provides an excellent fit of the data.
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