Study On EU Direct Investment In China

In the past three decades, the European Union (EU) has been the largest economy in terms of the foreign direct investment (FDI) amount, and China has also been on the road of being one of the countries accepting most inward direct investment. The EU is now the largest economy in total economic output in the world, whereas China is a thriving economic power, only next to the EU and the United States in GDP. The EU’s FDI in China, therefore, has a significant impact on economic growth, trade development and technological progress for both sides. But the reality is that, during a long period of time, EU’s total direct investment has gone less to China than to Hong Kong, British Virgin Islands, Japan, the United States or other countries/regions. Why does the growth rate of the EU’s direct investment in China fall behind other economies? Since the EU’s FDI in China is of such a small scale, then what kind of role will it play in China’s economic and trade growth, technological progress and other aspects exactly? Focusing on these problems, the dissertation chooses the EU’s FDI in China as the subject of study.Through online data collection, plus the methods of induction and deduction, comparative research and empirical tests, the dissertation establishes an analytical model and derives several findings which supposedly will help to enrich the theoretical study of foreign investment in China, to improve the utilization efficiency of foreign investment, to promote economic and trade growth, and technological progress.This dissertation is divided into several sections as follows:Chapter One is the introduction, in which the background and significance of the study is shown, as well as the basic concepts in question, the specific research methods, the innovations and the flaws.Chapter Two is the literature review, which is explored from the following three aspects:the impact of FDI on host countries’economic growth; the impact of FDI on host countries’foreign trade; the impact of FDI on host countries’technological advances.Chapter Three, the background of EU’Direct Investment in China, including the development of China’s policy to FDI; the developmrnt of FDI in China; the characters of FDI in China. Chapter Four elaborates upon the development and status quo of the EU’s direct investment in China. First comes the systematic review of the development process and status of the EU’s FDI; then starting from the overall condition of China’s accepting FDI, reviews the development process of the EU’s direct investment in China; and finally, describes the characters of the EU’s direct investment in China.Chapter Five conducts, through the newly established econometric models, an empirical research on the impacts of the EU’s direct investment on China’s economic growth, foreign trade development and technological progress. Starting from China’s economic reality and its current condition of accepting FDI from other major economies, Firstly, conducts an empirical test on the relationship between the EU’s direct investment and China’s economic growth, and a comparative research on the effect of other important economies’FDI in China on its economic growth, using the time-series data and the panel data respectively. On ground of the systematic review of development of China’s foreign trade, especially trade with the EU, and the data of 1986-2009, Secondly, offers an empirical analysis on the relationship among the EU’s direct investment, China’s foreign trade and China-EU trade through methods of co-integration test and Granger causality test. Based on the three phases of international direct investment influencing the host country’s technological progress (technology transfer, technological innovation and technology commercialization), Thirdly, sets up a regression model to evaluate the impact of the EU’s direct investment on China’s technological progress, and estimates the related equations through using the panel data of the 20 sample provinces (autonomous regions or municipalities).Chapter Six, the theoretical findings and empirical results are summarized and refined, and at the same time, the recommendation is show that China is supposed to gain more investment from the EU in light of the status of the preceding analysis and empirical research.All in all, this dissertation brings about three innovations as follows:(1) The history and the status quo of the EU’s direct investment is illustrated in a more comprehensive and systematic way, while the related analysis in previous literature is either too inclusive or too exclusive. Therefore, a ton of detailed data and references about the EU’s direct investment, which are collected for this dissertation, ensure a more systematical elaboration from diverse perspectives. For example, in elaborating upon the current situation of each EU member’s FDI in China, this dissertation may view the detailed data sheets from the perspective of China’s specific regions or industries accepting FDI from the EU, or of the specific member country offering FDI to China, or even a combination of them. (2) The study of multidimensional effects (economic growth, foreign trade, technological progress) produced by the EU’s direct investment in China is more systematic through empirical research and integrating a variety of impact analysis in this way is rare in the past literature. (3) Based on the three phases of technological progress in the host country via FDI (technology transfer, technological innovation and technology commercialization), the dissertation builds the regression model of technological progress through the EU’s direct investment in China. And then the dissertation studies China’s technological progress more clearly through the comparative analysis of various phases and different regions.Anyway, the dissertation leaves two points to be desired in future study. One is the imperfection of research methods. The empirical method employed expects more strict mathematical reasoning, which makes the logic transfer from the theoretical framework to the empirical model slightly awkward, and the empirical research, lack a solid foundation. It is, therefore, still of some urgency to enhance the rigor and the preciseness as to the research on the impact of the EU’s FDI in China. And the other is incompleteness of the research content. As to the study of the EU’s direct investment in China, there is more work waiting ahead. The impact of the EU’s direct investment in China is not just confined to economic growth, foreign trade and technological progress. In other words, the research focusing on these three aspects just provides a framework for the research in this aspect; to study other aspects, such as the role and impact of direct investment to China’s industrial structure, employment, and sustainable development, still needs more information to conduct a systematic and comprehensive in-depth study.