Foreign Direct Investment And Technology Advancement In China

Technology advancement is a significant impetus for the economic growth and is the major source of competitive advantage of a nation. It has become an urgent problem for China to improve its technology to narrow the gap between China and developed countries as soon as possible.Introducing technology through absorbing direct foreign investment (FDI) has become a prominent feature of Chinese technology import since the opening up and reform. FDI is the integration of capital, advanced technology and management experience. Introducing FDI can not only bring the funds that are needed in domestic construction, but also can bring the technology that is applicable to China, along with equipment and management experience. Meanwhile, in order to obtain the most advanced technology, China also needs to invest directly in other countries.Due to the fact that new technology and inventions mainly originate from developed countries, the employment of the new technology generally starts from those countries as well. Therefore, in order to acquire the innovative technology and information on its application in the market, the most effective approach for China is to establish its own branch institutes in the source country of the new technology.This thesis is divided up into four chapters. Chapter one is devoted to the introduction to the relevant economic theories. In Chapter two, the author of this thesis gives a brief account of the general situation of foreign investment that has been introduced to China. An analysis will be made on the technological level of the foreign investment companies. Furthermore, the author will illustrate the effect of introducing foreign investment on China's technological advancement from three aspects: the research and development activities of the foreign companies in China, direct technology transfer, and overflow effect. And its restrictions will also be pointed out. Chapter three is to investigate the current situation of China's investment export to other countries. It will be pointed out that investment export is a shortcut for China to improve its technology based on the analysis on the possibilities and approaches forimproving technological level through exporting direct investment. The problems existing in this field will be pointed out as well. Chapter four makes a comparison between the two methods of using foreign technology. The successful examples of Singapore and South Korea will be used for reference. Proposals will be made pertaining to promoting the technology development by combining the two methods of introducing foreign funds and exporting direct investment to other countries.At present, a lot of discussions have been made on the relations between introducing foreign investment and technological development, whereas the relations between exporting investment to foreign countries and technological advancement have rarely been touched upon. The originality of this thesis lies in that it makes a systematic study on the relations between outflow of direct foreign investment and technological development in China, in light of the organic study of the relations between inflow and outflow of direct foreign investment and technology advancement.