The Effect Of Foreign Direct Investment On China's Industrial Economic Structure

With the Reform and opening up policy carried out 30 years ago, foreign direct investment (FDI) has a great impact on Chinese economic development. On the one hand, it has promoted China's sustained economic growth, changed the way of China's economic growth and improved the quality of China's economic growth; On the other hand, it has brought about the unexpected negative effects. With the access to WTO, FDI has driven China's economy to a wider scope and deeper step so that the complexity and unpredictability of the impact has been further strengthened. Therefore, it's very necessary to sort out domestic and foreign relevant theoretical and empirical research and sum up practical results.This article begins with describing the current status of China's utilization of foreign capital. Our country has transferred from a traditional agricultural country into a developing country which has initially realized the industrialization. At present, the main problem of China's industrial structure is that the supply structure doesn't match the changes of the demand structure. Besides, the industries are lack of international competitiveness and high technology. After joining WTO, agriculture is facing more pressure of international competition; the secondary industry lacks of product development and marketing capabilities; tertiary industry is affected by various factors, especially the modern service industry which lacks of the high value-added product slows the development of the service industry. After three decades development, along with the multi-level and wide-ranging opening reform of the Chinese economy, the usage of foreign capital of our country enters into a new stage.With the advent of the era of knowledge economy, upgrading the industrial structure becomes the focus of modern economic development. Many scholars at home and abroad have done related research on foreign direct investment. There are some representative theories: Kiyoshi Kojima mode, the core for it is the marginal industrial expansion theory; Michael Porter's competitive advantage of development stage theory which contains elements-driven stage, investment-driven stage, innovation-driven stage and wealth-driven stage; Stephen ? Hymer's monopolistic advantage theory, including the technical advantages, low-cost advantages, capital and currency advantages, such as organization and management advantages; Chenery's dual-gap model pointing out that economic development is the evolution of economic structure or industrial structure. Because of the rigid structure, the host country's economic development will be limited by the shortage of the domestic resources, the introduction and utilization of foreign capital can fill the gap between the savings and the foreign exchange, promote economic growth and the structure conversion of the host country. Dunning's compromise theory of international production. Meanwhile, it considers that a company can engage in foreign direct only by congregating monopoly, internalization advantages and location advantages.The second part of the article analysis the impact which brings by foreign direct investment on China's industrial economic structure according to the related theories. As we all know, each reform will have both positive and negative effects, so does the usage of FDI by our country to adjust the industrial structure. FDI provides opportunities for our country, it promotes the growth of our export; it also promotes the upgrading of the industrial structure from the aspect of the correlation, demonstration and imitation , human resources aspects; the use of FDI The investment in the development of advanced industries. Meanwhile, FDI brings negative impact on the upgrading of China's industrial structure. It shows as the structural tilt of FDI has increased the structure bias of the three industries in our country; foreign investment has increased the structural tilt the structure of three industries our country bias, especially on the tertiary industry .Under the background of global economic crisis, FDI also has effect on real economy of various countries.In accordance with the impact of FDI on China's industrial structure ,the actual utilization of foreign capital, the data of the added value of the three industries brought by FDI, I design a model ln (GDPi) = Ci +βi×ln (FDIi) by using the regression analysis and hypothesis testing methods. The added value of the key indicator reflected the actual contribution of foreign investment in different sectors. The whole process is divided into three phases. The first stage studies the major changes of the structure of China's three industries. The second phase studies the distribution of foreign direct investment in three major industries in the structure. The third stage studies the contribution rate of the three major industries to GDP brought by foreign direct investment .The evidence shows that foreign direct investment and economic growth has a linear relationship, that is to say, due to FDI, the three major industries all have a significant impact on GDP. In addition, the trend of the graphics illustrates the actual usage of foreign funds is unreasonable to some extent. Although China's industrial structure has changed a lot, it's still seriously skewed compared with developed countries.After the pros and cons analysis and the empirical research, I concluded the corresponding inspiration and problem solving methods. I demonstrated from the following aspects, maintaining the stability of foreign investment policy, stepping up promotional activities, promoting exchanges to make full use of the existing policies; improving the investment environment, especially to set up and improve the hidden environment; Actively promoting the development of cross-border mergers and acquisitions in China , enriching the forms of utilization of foreign direct investment; Providing suggestions for the direction of foreign direct investment, as well as special responding measures under the economic crisis which is also the innovation point in this article.Finally I concluded that, our country should actively guide foreign direct investment to the first industry and the third industry, relatively reduce the investment proportion of the secondary industry. More importantly, we should actively guide FDI to the direction of heavy industry and technology-intensive industries and correspondingly reduce investment on consumption and general processing industries.