An Analysis Of The Effects Of China Outward FDI On The Domestic Technology Level

As the economy goes more and more globalized, the multi-national corporation from the developed countries are expanding everywhere of the word, at the same time the developing countries FDI increases greatly. At the beginning of this century, our government brought up the strategy of "going out", and the outward FDI of our country stepped into one new stage.The outward FDI of the developing countries, especially the FDI into the high-tech industries of the developed countries, often carries the technology sourcing purposes. Since the localization of the technology diffusion, the new technology from the developed countries is limited by the model transmit, and other man-made factors, could not spread to the other countries in the short time. Further more, in order to keep the monopolization position of the advanced technology, the multi-national corporations of the developed countries are inclined to adopt internal transaction, or use the outdate technology in the host countries. Hence, in order to learn the advanced technology in the developed countries, the companies from the developing countries take the technology sourcing FDI to promote the technology level in their countries. This kind of strategic FDI will increase the technology level from the following aspects: increase the R&D capability, reduce the R&D cost and periods, accumulate human resource, utilize the mature R&D system in the developed countries, and through the supply chain increase the technology of the industries. Using the data of our country outward FDI and total factor productivity (TFP), we estimate that the outward FDI has promoted the technology development of our countries, when the out FDI stock increase every 1%, the TFP in China will increase 0.414%. In order to get more advanced technology in the developed countries, we should put more FDI in the high tech industries in the developed countries, choose the suitable entry model, and increase the absorbing and innovating capability. The government should offer more financial support to the R&D activity and improve the legal system of the FDI.