The Comparing Study Of Foreign Direct Investment And Regional Industrial Cluster Divergence

The divergence of Eastern and Western Region can be partly due to the divergence of attract foreign direct investment (FDI) which has been due to the policy divergence by literature. In fact, the policy was really an important factor influencing the FDI decision making of location. Therefore, the more privilege policy has been offered to Western Region by Central Government since the Western Development Strategy has been launched. Unfortunately, the divergence is not lessoned but expanded, which means the privilege policy cannot be an important factor to attract FDI. This dissertation will analyze in what way the Western Region can attract FDI in the current time.Based on the Theory of Industrial Organization and New Economic Geography, analyzing the industrial divergence of Eastern and Western Region, the conclusion can be drowned: it is the industrial cluster but not privilege policy that influences the location decision-making of FDI. Therefore, it is very difficult to attract FDI for Western Region due to the backwardness of industrial while the more FDI are invested into Eastern Region due to the better industrial infrastructure. On the other hand, the earlier FDI in the Eastern Region will lead the way to the later comer so that the more FDI will be invested. So the divergence of industrial cluster of two regions leads to the divergence of FDI.