The Study On The Relationship Between FDI And Upgrading Of Industrial Structure On Central China

In December 2004, the strategy of "Rise of Central China" hasbeen proposed in the central economic work meeting. In February2005, the Central committee of the Communist Party of China madetwo important strategic decision of "scientific concept ofdevelopment" &"building a harmonious society". Construction of aharmonious society is based on the comprehensive development of allthe society, and the rise of the central is one part of building aharmonious society. Accordingly, the policy of "rise of the CentralChina" will not only give opportunity, but also put challenge for thesix central provinces, which are Shanxi, Anhui, Jiangxi, Henan, Hubei,and Hunan.The 20 years of reform and opening up has seen China's greatprogress. GDP maintains a rapid & stable growth and the income percapita has been rising continuously. Many studies have shown theimportant factors of rapid growth of the Chinese economy include thereasonable changes & upgrade of the industrial structure and themassive influx of foreign investment. The foreign investment has notonly brought scarce production factors in China, such as capital andtechnology, but also promoted the development and upgrading ofChina's industrial structure. In the background of economicglobalization, transnational direct investment, accompanying by thetransfer of international industrial, will be a more prominent role inchina's industrial restructuring. It will change the incrementalindustrial state. More importantly, it will change the industrialstructure and promote industrial upgrading.The paper focuses on the role of foreign investment in changingthe industrial structure of the central region. The author has reviewedforeign direct investment theory & structure theory, and integrated thetwo theories in a unified research framework. The paper reveals themechanism that the FDI promote economic growth and the upgrading of the industrial structure of the central region in economyglobalization. At last, the author gives some policy proposals ofadopting FDI in the central region.Firstly this paper has reviewed the transnational directinvestment theory and industrial structure theory, and then analysisthe concept of the industrial structure, the general rules of theevolution of the industrial structure and the industrial measurement.The author points out that the industrial structure is not only reflectionand result, but also the motive force of the economic development.The development experience of some newly industrialized countries,such as South Korea, shows that the impact to the host country'seconomic growth and the upgrading of the industrial structure isobvious and significant, which is especially true for the not-balanceddevelopment of the developing countries. The improvement of laborproductivity begins in some departments, not in all departments. Theincrease of production efficiency and the re-allocation of resources arerealized by transmission between industries.The paper analyzes the industrial construction and FDI statusfrom geographical location, nature resources and other areas of centralregion and comprises with the national average level. Compared withthe national average level, the proportion of the first and tertiaryindustry in the central region is a little high, while the second industryhas relatively low proportion. The FDI has a significant enhancementin terms of investment volume and investment structure, but there arestill some problems such as unreasonable investment industrialstructure, the average scale of the investment project is small, thestructure of the investment method is unreasonable, the investmentindustry is sole and the interrelatedness of the investment industry isinsufficient.The author gives a comprehensive and deep analysis about howthe FDI work on the industrial structure in the central region, whichinclude the technology spillover effect of FDI, the AssimilatedStructure effect and the shortage of industrial transformation. The author focuses on analyzing the technology spillover effect & the dualeconomy effect of FDI on the central region and founds that thespillover effect of FDI is not clear but the FDI can help eliminate thedual economic characteristics in the central region.The result of the empirical analysis about FDI on the upgradingof the industrial structure for the central region shows that the humancapital in the central region has not played a prominent role throughtechnology spillover effects of foreign capital in the process ofupgrading industrial structure for the central region. In the threeforeign investment methods in the central region, the foreign-fundedenterprises has the most obvious spillover effects and acts as asignificantly positive role on the industrial structure, while thecooperation and joint ventures act as no clear roles on the industrialstructure.Based on the analysis of the previous text, the author gives someadvices on attracting foreign investment for the upgrading of theindustrial structure in the central region from the two aspects of thestructure rationalization and high-graded.