Conflict&Coordination Between Tncs’ Motive And China’s Target Of Introducing FDI

This paper focuses on the interest conflict and equilibrium between transnational corporations (TNCs) and host countries, and practice of TNCs FDI in China is the key point. The logic thinking way of this paper is as following:the paper begins with the general model analysis on TNCs FDI in host countries, revealing their target or motive and their conflict. And then the paper focuses on the practice of TNCs FDI in China. Through empirical study on the TNCs FDI in China, the paper tries to reveal the investment motive of TNCs FDI and the impact on China’s technology progress. At the background of world economic crisis, the paper provides some suggestion on emendation and implementation of China’s foreign capital policy. The aim is hoping that the foreign capital policy can help to coordinate the conflict between government’s target and TNCs’motive and this is the original intention of this paper.There exists ineluctable conflict between TNCs and host country from the view of their different basic target. Obviously TNCs’basic target is trying to occupy and monopolize global market and obtain excessive profit while host country pays more attention on the realization of domestic macroeconomic. The process of TNCs FDI in host country is like a positive game process based on both parties’friendly cooperation and bargaining. The realization of TNCs FDI in host country is the result of coordinating these ineluctable opposition and conflict based on both parties’cooperation. Process of coordination in fact is the process of both parties carrying on reduction of their interest respectively and the degree of reduction based on their bargaining power, which will change with time of course.Since both parties are very careful during the bargaining on TNCs FDI in host country, collecting enough information of rival is necessary and basic. So we can define the game between TNCs and host country as full-information game. Considering that the realization of TNCS FDI in host country must based on both parties’cooperation, so the maximum revenue of host country have to be restricted by function of TNCs’investment scale. This paper tries to seek the equilibrium solution of the game between TNCs and host country. The solution shows that optimum preferential policy offered by host country is positively related with the capital gap of host country and negative related with investment environment of host country.In view of the situation of China’s inward FDI, the foreign-owned enterprises have become a very important role on promoting upgrade of both industrial structure and export structure. In order to attract TNCs’FDI, the Chinese government offer super national treatment to foreign-owned enterprises, including lower of cancel income taxes, exemption from import tariff and subsides for infrastructure. The rational for this special treatment stems fro the belief that foreign investment can not only bring money but generate externalities in the form of technology spillover. Chinese government have two main targets on utilizing FDI, one is hoping foreign-owned enterprises can push the export and the other is hoping they can generate benefit of technology spillovers, i.e. hoping market for technology. From the practice of FDI in China, foreign-owned enterprises do have a big function on China’s export and export structure, especially on high-technology industry at one side, however, monopolize and control majority of high-technology industry in China on the other side.From the view of TNCs’FDI motive, there exist quite difference among different source of TNCs. TNCs from western developed countries are trying to occupy the China’s market and they look China’s huge potential market as first. Although labor cost gap between China and west developed countries is reducing, it doesn’t affect FDI from west countries in China. TNCs from Japan have similar motive as from western developed countries. FDI from HK have obviously trade-oriented character, their initial motive is utilizing cheaper labor in mainland of China.In the aspect of investigating the quality of TNCs FDI in China, this paper choose high technology industry as study sample for it is foreign capital intensive and analyze the impact of foreign-owned enterprises on domestic enterprises’technology progress and innovation capacity by utilizing panel data. Study shows that TNCs FDI has positive impact on technology progress and innovation capacity of domestic enterprises through channels such as demonstration effect, R&D personnel flow etc. On the other side, however, TNCs FDI has negative impact on domestic enterprises’technology progress through extrude effect. Both impacts exist at the same time, but general impact of TNCs FDI is positive and the spillovers effect of foreign-owned enterprises does exist.World economy is still under the shadow of economic crisis and the western countries are trying to seek ways to solve the high financial deficit and high unemployment rate. Under the influence of economic crisis, China faces many difficulties on the way of development. Face complicated domestic and international environment, China should always insist on the center of economic development and insist on reforming and opening. The Chinese should fully understand the role of TNCs on the world economic development, especially on technology progress and innovation and insist on introducing TNCs’ FDI. While making FDI policy, policy maker should consider factor endowment of different region in China seriously and try to combine FDI with industrial structure adjustment and regional economic development. The policy maker should eliminate all unequal preferential policy and carry out equal policy to both foreign-owned and domestic enterprises according to domestic general industrial policy and regional development, and that will the right direction of FDI policy adjustment.