Spillover Effects Of Foreign Direct Investment On The Sustainable Development In China

Foreign Direct Investment (FDI) accelerated economic development and transition of China since the adoption of reform and open policy. Since China became a member of WTO, there have been a lot of new questions faced by opening up which raised arguments on FDI policy. For example, argument on economic security induced by high reliability on foreign capital; argument on high technology reliability on foreign enterprises; rethinking on "trade technology with market" policy caused by low technological innovation capabilities. There are also disputes between "comparative advantage theories" and "foreign capital reliability syndrome" among economists.Economic development model of China has transformed since the scientific development view brought out, research on FDI should be focused on new perspective. Therefore, adopting political and economic interactive logic of new political economics and analysis framework of new institutional economics, this paper analyzes effects of FDI to China's economic and social environmental institutional evolution from the starting point of dynamic institutional change in order to design new capital attraction policy under sustainable development strategy.This paper would discuss from six aspects.Research of FDI is based on "causes" and "consequences". Discussions on "causes" include investment behavior, investment location, investment modes and scales of MNCs; "Consequences" are about effects of FDI (direct and indirect). Nowadays research on FDI is mainly guided by neoclassical economic paradigm, while literatures of new institutional economics also increase. Since discussion on sustainable development emerges around the world, literatures on spill-over effects on sustainable development of FDI also appear.This paper constructs an analytical framework of spill-over effects on sustainable development of FDI. Starting from relation between development and institution, transformation between institutions, the paper emphasizes relationship between institution and sustainable development, concentrating the spill-over effects on institutional evolution. The discussion mainly starts from three aspects of economy, society and environmental protection.Institutional analysis of FDI to economic development focuses on effects on China's political and economic institutional evolution. There are positive spill-over effects from theoretical and empirical aspects. Those positive effects include rationalization level on government, organizational efficiency and local governmental administrative level, etc. Through embedded into Chinese economic and social system, FDI cultivates its "agents" unconsciously. The working mechanism is good performance of FDI set foundation for its legal validity, therefore people advocate open up policies acquired power, resources and reputation within the institutions. These people help FDI administrative framework develop toward liberalization, institutionalization and internationalization. Reversely, it will accelerate quick economic growth and reflect mutual reinforcement logic of politic and economy.Effects FDI on social development is one part of whole institutional evolution. FDI enlarges income disparity between different areas and different levels. This results from disequilibrium development policy of China. From perspective of labor relation administrative institutional reform, roles played by FDI inform in three aspects: as "agent" of China's reform, FDI encourages policy experiment in the most difficult part of reform such as free mobilization of labors, market construction, etc; FDI provides legal validity to deeper reform since good performance of foreign enterprises lay feasibility foundation labor administrative policies; FDI also brings about reform pressure to state-owned enterprises and market competition of foreign enterprises would stimulate state-owned enterprises of China d adopt active reforms.It's difficult to appraise effects of FDI on environment. One of the reasons is difficulty of statistical data of environmental indicators; on the other hand, suitable quantitative analytical tools are lacked. Spill-over effects of FDI on environment such as "assumption of pollution refuge" and "assumption of pollution halo" have not been verified in China. From the viewpoint of institutional reform, FDI seldom brought about positive effects on China's environmental administrative institutional reform mainly because we didn't adopt environmental technical standards, environmental administrative standards and administrative institutional system of "home country". This is decided by China's economic growth model.Based on the above mentioned research, the paper concludes on the effects of FDI on sustainable development and institutional analysis. Institutional analysis is conducted along two dimensions, one is regulative framework of FDI decides the types and location of FDI; the second is FDI bring about positive effects to institutional reform and improve institutional quality since the open up and reform policy adoption. Under strategic target of sustainable development, policy modification of FDI should emphasize upgrading of China's institutional quality, build equitable environment to operation of different ownership types, regulate foreign enterprises behavior through multilateral and bilateral contracts, improve quality of foreign investment catalog, refine local governmental competitive framework and reinforce environmental administrative regulations, etc.