| Services sector has been called the"adhesive"of industrial and market development. In the current process of the fast development of the national economics and the entering into the international market in the form of globalization, FDI in services sector is the most striking and takes an weight of above 60%. In the past 30 years, China has achieved a striking economic development. Its GDP rate remains above 9%. China has evolved from an agricultural country to the"world factory"successfully. This successful transformation can be partly attributed to the continuous FDI inflows, which have brought a comprehensive and profound impact on China's economy. Since entering WTO in 2001, China has begun to open her services industry to a greater degree. Services industry has become a new important area for FDI in China. Till 2008, FDI in services industry has taken up more than 41% in all of the actual foreign direct investment utilization, nearly 15% higher than that of 1997. FDI in services industry becomes more and more significant in the investment in China. This has provided the basic intuition for this thesis.The mainstream FDI theories are the theoretical references for the research on the services industry. Based on the analysis on the mainstream FDI theories of the manufacturing industries, this thesis will discuss the feasibility of these theories for explaining FDI in the services industries. Because of the particularities of the services industry, the theories of the manufacturing industries cannot be lent to study the services industry. The theories for the services industry is the development and innovation of the international investment theories. While the industrial structure theories and the economic growth theories have paid a solid foundation for studying the economic effect of FDI in the services industry. All these theories have provided a solid foundation for this thesis. This thesis sets FDI in services industry for research, discusses and analyzes the types and paths of the economic effects of FDI in services industry in the host country. The industrial structure effect and the economic growth effect, which are the two most basic and major effects, have been the context of this thesis. Eviews 6.0 has been used for the empirical study on the industrial structure effect and economic growth effect of FDI in services industry in China. The results indicate: FDI in services industry does not show a significant industrial optimization effect on the first industry and services industry in China, while the domestic factors investment has a more significant optimization effect in these two industries; there is a one-period lag of the industrial structure optimization effect in the second industry in China, but with a significant positive impact. FDI in services industry has a significant direct economic growth effect in China, and with a positive impact. But there is an indirect barricading effect in general. These findings indicate that there are two problems in FDI utilization in China's services industry: the structure of FDI in industrial industry is not reasonable; there are problems with China's services industry itself. The aim of studying the problem and proposing the policy suggestions is to improving the strategies of introducing and utilizing FDI in services industry, so that it can have a greater positive impact on China's economy.Our innovations include the following aspects: (1) innovation in the topic. The research is oriented in FDI in services industry, which is the emerging force of investment in both China's and the world economy. It is significantly realistic to study the industrial structure effect and the economic growth effect of FDI in services industry in the host country. (2) innovation in theory, based on the analysis on the mainstream FDI theories of the manufacturing industries, this thesis will discuss the feasibility of these theories for explaining FDI in the services industries. According OIL theory of Dunning, combining the characteristic of service industry, we analyze the causes of FDI in services industry from superiorities of Ownership, Internalization and Location. This discussion is a helpful try to research the impact and development of the FDI theory based on the services industries. (3) innovation in the research methodology. It is rarely found in China to study FDI on both the provincial and the sectoral basis. In testing the industry structure effects of FDI in services industry, we have analyzed not only the direct action to services sector in China, but also the indirect actions to the first industry and the second industry. This analysis shows the strong characteristics of osmosis and ductility in services sector. In testing the economic growth effect of FDI in services industry in China's economy, we have employed FDI in services industry, manufacturing industry and the domestic overall fixed assets investment as the explanatory variables, and adopted comparison method to compare their roles in China's economic growth. The results are thought-provoking.
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