A Study On The Causes And Effects Of Foreign Direct Divestment In China

With the continuous evolution of economic globalization,multinational corporations have become the main objects of competition among countries all over the world.Since 1978,China’s economy has gradually integrated into the global economic system,through the implementation of reform and opening-up,the continuous introduction of foreign direct investment(FDI)and the development of international trade.After the outbreak of the international financial crisis in 2008,developed countries paid more attention to the real economy,returned to manufacturing industry,and attracted transnational corporations to invest.With China’s economy changing from high-speed growth to medium-low-speed growth,under the influence of domestic and foreign economic situation,the phenomenon of foreign direct divestment(FDD)in China’s real economy has become more and more serious.In 2014,the amount of FDD amounted to 90.60 billion US dollars,which has already had a very negative impact on China’s economy in terms of international trade and employment.Therefore,this paper takes FDD as the research object,and tries to analyze FDD in China from the aspects of influencing factors,economic effects and policy enlightenment on the basis of measuring the number of FDD.The research on FDI in academic circles at home and abroad can be divided into investment and divestment.The academic circles have begun to study FDI earlier,and the research results are quite rich.However,researches on FDD began in the 1970 s.Most of these researches were conducted from the perspective of multinational corporations,based on the micro-data obtained from questionnaire surveys,from the aspects of strategic adjustment of foreign corporations,global production network adjustment,impact of FDD on company value,and process and efficiency of FDD.There are few studies on FDD from the perspective of the host country.Based on the statistical data,this paper analyzes FDD in China from the perspective of how to better use of FDI in host country,calculates the scale of FDD,analyzes the investing and operating conditions of FDI,finds the reason and the way of FDI,and measuring the economic effects of FDD.From the host country’s point of view,FDD is the return of capital to the home country or transfer to a third country for investment.Therefore,this paper tries to put forward " FDD model" to study FDD,and takes trade friction as an influencing factor or exogenous variable of FDD.In addition,starting from the hypothesis that the aim of foreign companies is to maximize profits,assuming that the production of foreign companies satisfies the Cob-Douglas production function,this paper attempts to establish "the theory of FDD based on the optimal capital stock".Based on this theory,a quantitative model is constructed to analyze FDD in China.The results show that micro environmental factors such as cost,tax level and tax preference degree of foreign enterprises in China,as well as macro environmental factors such as economic growth rate,government debt level and trade friction degree,all have a significant impact on FDD.Meanwhile,based on the statistical data,this paper also estimates the impact of FDD on China’s economy in terms of production,employment,taxation,balance of payments and technological progress.This paper points out that,although China is still a developing country,as the largest emerging markets economy,China has some unique advantages,for example,medium-high economic growth rate,relatively complete industrial system,relatively large technology research team,as well as the huge domestic market and the remarkable economic difference between different economic regions,etc.These advantages can not only play the role of reducing the shock of FDD from the quantitative aspect,but also may promote the structural upgrading of foreign companies from the qualitative aspect.In order to give full play to these advantages,this paper puts forward the following reform ideas and suggestions: 1)establish a response mechanism for FDD,including the early-warning mechanism before FDD and the government intervention mechanism in the divestment process;2)optimizing the micro-environmental factors,including making full use of new resources endowment structure advantages such as "talent dividend","complete industrial supporting system","the huge size of the market",controlling production costs reasonably,and optimizing the tax policy to reduce the tax burden of FDI,through cutting tax and fees and implementing free trade area preferential policies;3)preventing and defusing macro environmental risks,including controlling the scale of government debt,reducing the cost of government debt,regulating government investment behavior,and defusing the risk of government debt;4)strengthening international cooperation,especially innovating regional economic cooperation mechanisms,optimizing the new pattern of opening up,and mitigating the negative effects of trade frictions.