An Analysis On The Effects Of China's Inward FDI On Employment

Since the reform and opening up to the outside world, the increasing foreign investments has played more and more important role in China's economy and the governments of all levels have regarded the Foreign Direct Investment (FDI) more and more as an important way to resolve our country's employment problem. In this article, we choose the employment effect of FDI as the aims of this research. Firstly, the effects of FDI on the host countries'employment are divided into three factors: the quantity, the quality and human capital, each of which has direct and indirect effect. According to the different factors and different ways influencing direct and indirect employment effect, FDI is divided into annual FDI and accumulated FDI respectively.Then, this article builds the model of quantity effects of FDI basing on Cob-Douglas production functions, puts forward the key econometrical model of this paper, enters into empirical analysis with data of the whole county, of the Eastern, Middle, Western region separately, and gives explanations to all sorts of results of the empirical study in this paper.After this, this article analyzes qualitatively the effect of Foreign Direct Investment on human capital.Finally, this paper draws the basic conclusions that the direct effects of Foreign Direct Investment the whole country employment quantity and wages are positive, but the indirect effects are negative during 1987-2005. The results are also the same for the Eastern, Middle and Western regions during 1990-2004, which is shorting of data before 1990.The effect of Foreign Direct Investment on human capital is positive mainly, which benefits the domestic enterprises absorb the spillover effect of foreign ones, and increase their competitiveness, In this aspect, Foreign Direct Investment can expand employment quantity and increase wages in the long term.The author provides constructive suggestions for Chinese government that we should admit the negative effects of Foreign Direct Investment on employment quantity and wages when we emphasize the positive ones, and it is of great importance for enterprises to pay more attention to technology transfer, to gain advanced technology from high-tech quality of FDI, to improve the competitive ability of themselves, and to relieve the negative effects of FDI on employment and wages.