Service Sector Fdi And Host Country Manufacturing Efficiency

In the past few dacades, FDI has been growing rapidly in the service sector, making it the main field of FDI worldwide. From 1990 to 2007, inward FDI stocks almost tenfolded, growing from $948.106 billion to $10020.483 billion,and the percentage of FDI in services has been growing from 48.61 to 63.84. In China, from 1997 to 2008, FDI inflows in service sectors has been growing by 214%, from $12.06 billion to 37.95 billion, with the percentage growing from 26.65 to 41.07.Compared to the rapid growth of FDI practice in services, theoretical and empiracal studies in this regard are far from being enough, espetially in terms of corralations between FDI in services and economic growth in host countries. This theis focuses on coralations between FDI in services and manufacturing efficiencies in host countries. The thesis is introduced based on the following background:first, lately FDI has been growing more rapidly in service sector than in manufacturing sectors. Openning up service sectors makes an important part of China's effort of furthur economic reform and opening up; second, judged from the percentage of value added, employment and exportation, manufacturing sector is and will still be one of the most important sectors in China. Current factor endownment structure in China also indicates that labor-intensive manufacturing is still important; third, Chinese manufacturing needs to improve its output efficiencies and international compentancies due to changes to the environment of its development, such as higher labor costs, more stringent reqirement from natral resources endownments; fourth, producer services have become an important source of the efficiency improvement of manfacturing sectors, with the trend of manufacturing servitization. With the above backdrops, it is with theoretical and practical significance to study the mechanisms of service FDI improving manufacturing efficiencies in host countries.Combining theoretical and empirical studies, literature review and case studies, based on theories on specilasation and labor division, economic growth, transnational investment and accumulation economics, the thesis analyses the mechanisms of FDI in services improving manufacturing efficiencies in host countries, and tests the theoretical implications with China's industrial panal data.The thesis covers seven chapters. Chapter one is introduction, presenting backgrounds, methods, contents and possible innovations of the study.Chapter two defines key concepts and reviews related literature. Chapter three presents the development and trends of FDI in services. Chapter four deals with the roles that producer services play in manufacturing industry development, serving as a basis for the analysis on the corrational between FDI in services and manufacturing efficiencies in host countries,which is what Chapter five focuses on. In Chapter five, the direct and indirect channels with which FDI in services influences manufacturing efficiencies in host countries are analysed, and with China's inudtrial panal data, the forward and backward linkage effects of FDI in services on manufacturing efficiencies are tested empiracally.The Chapter ends with a case study on the openning up of China's management consultation. Chapter six analyses determinants of FDI in services and the environment of attracting FDI in services in China. The empiracal studies with China's provincial panal data indicates that infrastructure, human capital, service sector development and FDI in manufacturing are important determinants of FDI in services; however, regional GDP's influence is insignificant.Possible innovations in this thesis are as follows:1. The thesis involves spillover effects of FDI in services on manufacturing industries in host countries, which is seldom found in literature. Studies on spillover effects of FDI are abundant in literature. Lately the foucs has been on intra-industry spillovers and inter-industry spillovers.However, few unanimous conclusions can be found in both theoretical and empirical studies; on the other hand, most empirical studies on inter-industry spillovers only focus on within manufacturing industries, few has examined the interindustry spillovers between service and manufacturing sectors.This thesis analyses corelations between FDI in services and manufacturing indutries in host countries, designs forward-linkage and backward-linkage varables, and test the corralations empirically with panal data of China's 15 manufacturing indutries from 2001 to 2008, which is rarely found in domestic literature.2. The model specifications and data in the empiracal study on determinants of FDI in services. Past studies on the same topic are either based on foreign data, or not taking into considerations of characteristics of FDI in services in China. The empiracal study in this thesis considers the great percentage of FDI in real estate industry and other producer service industries as two characteristics of China's inward FDI in services, and employs some new variables and uses panal data, which provides better data basis for the empirical study.