In China, as in many other developing countries, the attraction of Foreign Direct Investments (FDI) inflows has been contemplated as a powerful tool to promote quality upgrades to the product structure and consequently to boost economic growth. This research relying on data from Chinese cities invalidates these expectations. More precisely, the authors assess to what extent the growth gains from the complexity of goods produced by firms depend on whether they are domestic or foreign. They find that product sophistication is not conducive to economic growth when it emanates from foreign firms which are mostly engaged in processing trade activities. This invites to be cautious about the gains to be expected from an internationalization strategy based on special economic zones as they mainly attract foreign firms involved in export-platform FDI.
