International Corporation And The Development Of China's Domestic Industries

During the last 20 years of China's economic reform and increasing participation in international trade, Foreign Direct Investment (FDI) was flowing into China, which produced a deep and long term effect on China's economy. After 1990, many international corporations have invested in China with substantial FDI flowing in. This has had the effect of reducing the capital shortage and creating many employment opportunities. However, this is not the only issue related to the increase in FDI. FDI also has a negative impact on the development of China's domestic industries. Therefore, whether China's domestic industries can develop successfully under FDI has become a pressing question.The aim of this thesis is to explore the above issue. At first, models of the developing country industries under the effect of international corporations were analyzed. Then a series of influences and effects on China's industry are analyzed, namely, the industry control, the industry suppression, the industry security, the development model of China's industry as well as the new strategy used by international corporations after China entered the WTO. The conclusion of the above analysis was that to maintain smooth and healthy development of China's industries under investment from international corporations, the independent industry development model is the best strategy. This model dictates that industry policies should be established which utilize investment from international corporations effectively. As a result, the competitive capacity of China's industry will be greatly enhanced and China can keep pace with economic globalization.