The Theory Of Technology Spillovers From Foreign Direct Investment And China's Practice

Advanced technology is an engineer to growth and development in modem economy, so it is our top concern to procure advanced technology so as to promote sustainable and healthy development of our economy at the cheapest cost. International capital flow has been so robust since the 1980s that FDI becomes a major form of capital flow, and it becomes an important channel for developing host countries to get technology spillovers. This paper first briefly examines the origin of theories about technology spillovers. New Classic Growth Theory pays excessive attention to the importance of the capital factor to economy growth while Endogenous Growth Theory introduces endogenous technology factors such as human capital, knowledge, and argues that it is possible for developing host countries to achieve sustainable economic growth. New Institution Economics Theory thinks institutions are endogenous factors that can affect economic growth. Deeply and thoroughly the paper studies literature related to technology spillovers from FDI, and to our policy strategy "Procurement of Foreign Advanced Technology at the Cost of the Home Market", the paper argues that FDI does reveal some proprietary knowledge to our industries, but that this effect distributes unevenly among different industries and different economic areas: more in the eastern area in China and less in the central and western parts, and more in the labor-intensive manufactures such as textile, processing, retailing and less in the technology-intensive industries such as mobile industry. Further the paper analyzes channels achieving technology spillovers from FDI, effective factors which restrict the absorptive capacity. Finally the paper puts foreword some countermeasures to increase our own absorptive capacity to technology spillovers from FDI such as to invest more in R&D, to deepen industry relations, to reinforce industry accumulation effect on our industries and to develop better frustration in communication, transport in order to achieve more technology spillovers from FDI.