Foreign Direct Investment In Chinese Manufacturing Competitiveness To Enhance The Impact Mechanism

Manufacturing industry has the fundamental position in national economy. On one hand, it renders the goods to people's daily life. On the other hand, it also supplies the labor tools and materials to the producers. Considering all the developed countries, most of their manufacturing industries were competitiveness in the world for a certain period, although their developing approach and historical background were different. The famous economist, Nicholas Kaldor, regards manufacturing industry as the "engine" of national economy.Since the reform and opening-up, China's manufacturing industry has realized eye-catching achievements. Many products of China's manufacturing industry have taken the first position in the world marketplace and the international competitiveness of manufacturing industry is enhancing gradually. There are many reasons that cause the improvement of competitiveness of China's manufacturing industry, but FDI is the most important reason. Now, China has become the largest FDI recipient in the world and around 70 percent FDI inflows crowed into the manufacturing industry. Therefore, the relationship between FDI inflow and the development of China's manufacturing industry is very close. In other word, the development of China's manufacturing industry is FDI-driven development. In this dissertation we analyze the impact mechanism of FDI on the competitiveness improvement of China's manufacturing industry from three aspects. The whole dissertation is divided into three parts and six chapters as follows:The first part includes chapter one and chapter two. Chapter one is the outline of the dissertation which explains the reasons of choosing this topic, the approaches, the analytical frame and the structure of this paper. Chapter two is a literature review.The second part includes chapter three to chapter five which analyze the impacts and effects of FDI on the competitiveness improvement of China's manufacturing industry through three aspects: technology inflow, market structure, and adjusting and upgrading of industrial structure.Chapter three shows the impacts and effects of technology transfer and spillovers of FDI on technology improvement of China's manufacturing industry. Based on the theoretical models, we find the elements that affect the horizontal and vertical technology transfer of FDI. The results show that market scale, market competition, technology spillover and the cost of technology transfer are key elements to decide the level of technology transfer of multinationals. Furthermore, multinationals tend to transfer technology through intra-firm instead of inter-firm in order to prevent technology leakage. Therefore, technology spillovers are more important than technology transfer for the host country to achieve technology advance. Finally, the econometric analysis by using panel dataset and Malmquist TFP index indicates significant and positive vertical technology spillovers from FDI to local enterprises. The effects of horizontal technology spillover in the same sector are ambiguous.Chapter four explains the impacts and effects of FDI on the market structure of manufacturing industry. Particularly, we hope to find whether FDI inflows boost or hinder the market competition of manufacturing sectors. According to the theoretical analysis, FDI inflows will enhance the industrial entry barrier and market convergence of host country. However, the anti-competitive effects are not absolutely negative for the industrial competitiveness of host country. The concrete effects of FDI inflows on market competition of host country are decided by some other elements, such as market competitive characteristics of host country before FDI inflows and the policies enacted by the host government to restrict the anti-competitive behaviors of multinationals. Before FDI inflows, the characteristics of China's manufacturing industry show the coexistence of non-economic monopoly and over-competition. FDI inflows enhance the market convergence and improve scale economy. Those will improve the market structure of China's manufacturing industry. However, in consideration of some anti-competitive behaviors of multinationals, it is necessary for Chinese government to establish competitive-policies to control the monopoly behaviors of multinationals.Chapter five explains the impacts and effects of inward FDI on adjusting and upgrading manufacturing industrial structure. The theoretical analysis shows that FDI is a catalyst to the development of host industry under some conditions and accelerate the speed of adjusting and upgrading industrial structure. According to the results of empirical analysis, the industrial structure of China's manufacturing industry is in the transition from labor-intensive industry to capital and technology-intensive industry. The deviation of FDI in different manufacturing sectors is an important reason for the above transition. Most FDI inflows mainly poured into the mechanical and electrical sectors, which are technology-and capital-intensive sectors in China's manufacturing industry, and accelerate their growth rate. Furthermore, the fast development in these sectors will enhance the growth rate of other sectors through strong industrial linkages, and then upgrade manufacturing industrial structure.The third part includes chapter six and conclusion. Based on the results of the former chapters and the reality of China's manufacturing industry, we summarize the impacts of FDI on the competitiveness improvement of China's manufacturing industry and propose some suggestions.