The Analysis On Backward Linkage Between FDI And China's Industry And Its Determinants

Since reform and opening,China unswervingly pursue the policy of opening to the outside world, and FDI did play an important role in solving the short-fund problem at the beginning of economic development.Entering the 21st century, with the repid growth of China, FDI gradually becomes a significant channel of gaining advanced science and technology as well as managerial expertise. However, wether the effective linkage effect has happened between FDI and China's industry? Or the FDI only aims at the rich labor resourse and promising market?Morevoer wether there are some key factors to determine the industry linkage?This paper,firstly, gives a definition of the backward linkage and makes a comprehensive analysis of the current situation between FDI and China's industry. Then,we apply DEA to measure Malmquist Productivity index of 20 industries in China for the period 1999~2006.And we also examine the linkage effects between FDI and local industry technical progress in different determinants of backward linkage respectively. The reslut shows that,in the condition of ignoring determinants, the backward linkage is the main aspect, while the horizontal linkage effect is less significant than the vertical linkage effect. The participation of MNCs leads to extrusion effect. After considering the determinants, the backward linkage effect become much weaker than before, which means the backward linkage effect between FDI and local industry in China is determined by some factors and we find that the local R&D input is a key factor.Finally, in the view of improving investment environment and strengthening backward linkage we give some political proposals based on the theoretical and empiritical analysis.