Foreign Capital Utilization Efficiency Analysis In China

Since the policies of opening to the outside world,the amount of introducing foreign investment have increased with years. The scale of our incorporating foreign direct investment maintained a good momentum of growth ,from 110.07 hundred million dollars in 1992 to 923.95 hundred million dollars in 2008. In comparison with the developing countries, our achievements of introducing foreign investment were obvious. The foreign capital inflow solved the problem of capital scarcity , upgraded the industrial structure , accelerated the developmentment of new high-tech industry , promoted the technical progress and managerial and administrative expertise , enlarged job opportunity and made an important contribution to economic growth.But we pay attention to the positive effect of the utilization of foreign capital and impaired its efficiency. The financial crisis influence the efficiency of the utilization of foreign capital. Under these circumstances,we must make an intensive study of the factors of influencing the efficiency of the utilization of foreign capital.Economics believes efficiency is optimizing the allocation of resources. The efficiency of the utilization of foreign capital means the use of the right amount of foreign capital on the condition of taking full advantage of the utilization of domestic capital.The inefficiency of the utilization of foreign capital register as the foreign capital inflow and the speculative foreign capital inflow on the condition of wasting domestic capital. Many scholars at home and abroad think the scale of utilization of foreign capital in our country is large and inefficient. They grouped the lower efficiency of utilization of foreign capital into two specific manifestations: First, the existence of negative savings gap and the inflow of foreign capital at the same time; second, the inseparability of substantial foreign capital inflows and capital flight.The development of the form of China's foreign capital utilization showed a clear phase. Phase One: exploratory stage of budding (1979 -1984); the second phase: the initial investment phase (1985 -1991); the third phase: the rapid development phase (1992 -2001); the fourth stage: stable development stage (2002-present). From these stages of development we can see that our country still faced with many problems at the utilization of foreign capital: First of all, our country did not make good use of domestic capital while used foreign capital. The use of foreign capital can only be supplementary to the use of domestic capital, but can not replace the use of domestic capital. From the situation of China's current investment and consumption,it is not necessary to incorporate foreign investment.Second, preferential treatment for foreign capital undermines fair competition in operating mechanism of the market. Foreign-invested enterprises rely on its own strong financial resources, and special preferential policies to develop and expand rapidly. Third, our country only pays attention to the volume of incorporating foreign investment, neglects the quality of incorporating foreign investment and our country's industrial structure, such irrational mentality plays a strong role in misleading in the present reasonable use of foreign capital, exacerbates the imbalance of China's industrial structure and regional structure. Fourth, the introduction of foreign investment is low technological, inadequate and duplicate. Finally, the financial crisis have a significant impact of incorporating foreign direct investment of our country .Our country today not only has the above shortcomings on the use of foreign capital, but also has some factors of impact of improving the efficiency of using foreign capital. First, in the form of financial monopolies, our country lack of reasonable use of domestic capital with the strange phenomenon of household savings and bank's grudging loan. Secondly, non-marketing interest rates also reduce the efficiency of utilization of foreign capital. Third, non-marketing exchange rates resulted in expansion of inflow of foreign capital into our country, this inflow of foreign capital are improper and inefficient, we should attack the damage of hot money to China's economy. Fourth, overseas processing trade makes effective use of China's relatively inexpensive labor costs and land costs in order to gain high profits, but it does not effectively contribute to our country related to the level of industrial technology and improve trade structure optimization. Finally, the boosting role of foreign-funded enterprises to domestic enterprises have obvious relationship with foreign-funded enterprises and the technical management level.After analyzing China's current problems of utilization of foreign capital and the factors of causing inefficient use, in the situations of the new international and domestic we must take effective countermeasures. First, we should deepen and strengthen financial to improve foreign capital utilization efficiency gradually. Second, we should vigorously strengthen the building of foreign-related economic laws, put the use of foreign investment into the legal system of a standardized track. Third,we should guide foreign investment to optimize the investment structure reasonably. Fourth, our country should focus on the use of foreign capital from emphasis on the quantity to quality and efficiency, that is,maintaining an appropriate use of foreign direct investment to optimize the quality of foreign-invested enterprises ,to encourage the development of large scale, advanced technologies, scientific management of high-quality foreign investment enterprises. Fifth, we should take appropriate means to prevent the monopoly of transnational corporations, to protect national industry. Finally, we should balance domestic development and opening to the outside world, to deal with global financial crisis.The above-mentioned , we identify the factors of impact of efficiency of utilization of foreign capital find out the reasons of impact the efficiency of utilization foreign capital, provide some reference to the use of foreign capital for our country,ensure the efficiency of utilization of foreign capital in China, so that our country improve international competitiveness through the use of foreign capital.