MNC Decision-Making Behavior And China's Outsourcing Policy

In today's world, the process of economic integration with the rapid development of network technology, making the total of national economies linked. Each country takes full advantage of its comparative advantage to participate in the international division of labor in the past. The international division of labor in today's show an eye-catching feature, that is, the production process consists of many different processes and demolished section assigned to different countries to form process, section, and part of the division of labor for the object, known as vertically linked in international production. The company is the commitment of a country's economy of the main micro part, and multinational companies are the main organizer and driving force of such division of labor. Refinement of the international division of labor, multinational companies make enterprise-wide restrictions, according to the comparative advantages of various enterprises, and contracting the product section of the different processes out, then form an increasingly popular management concept - Outsourcing.Multinational companies are to promote an important force for economic globalization, and it have become the trend, it is necessary to analyze how multinational co-operation with the outside in order to analyze how a country's participation in the international division of labor. Today's enterprise is no longer relying on the traditional strategy of"R&D, production, logistics, marketing, and service integration", but to fight a war, and to seek external partners. China's reform and opening up, because the active participation of the international division of labor and cooperation, and China obtain a comparative advantage in international trade, which also attributed to the manufacturing sector. China has actively undertaken outsourcing. The last century to take a large number of manufacturing outsourcing in China has created a miracle in world development, and services outsourcing in today's world has become a new industry, some people who share the view that the 21st century trade in services, will hold the initiative in trade in the 21st century. It was also noted that the 21st century, trade in services like the processing trade in China, maybe the creation of another miracle.However, from the scale of the service sector outsourcing market which China undertaking, China take a very small market size. From the regional distribution, China, mainly undertake international outsourcing of near-shoring business from neighboring countries such as Japan, South Korea, but have only less successful cases in Europe and America market, which is the global mainstream, and the overall competitiveness is weak. From the size and quality point of view of the enterprise, China's local enterprises are still relatively small-scale, which can not be compared with international giants such as IBM, even can not be compared with larger enterprises in India, which have more than tenfold gap even greater than china's. From multinational companies to set up service centers and related organizations to provide perspective, this type of investment mainly due to the factors of China's domestic market to attract, are market seeking FDI in service; from a comparative point of view the benefits undertake international outsourcing in China as a center of efficiency seeking FDI in service is relatively small. Various provinces in China are actively introducing outsourcing, but as long as each of the provinces have to fight outsourcing, there is no overall planning of a national, provincial nor the focus of an industry, manufacturing outsourcing every province has the country, trade in services also approved 27 cities, and are concentrated mainly in the whole of the large and medium-sized cities. A City in China does not have the same characteristics. There is no scale of industrial clustering.In the new-new trade theory, incomplete contract and industries heterogeneous interactions each other, and both of them forecast internationalize and off-shore production, in particular to explain the current prevalence of the four major forms of business organizations includes domestic market integration, local outsourcing, foreign vertical integration and foreign outsourcing, which provides a new perspective to explain the existing international trade and international investment model. This paper will follow the new-new trade theory, and base on the heterogeneous enterprise and business model of endogenous border, and introduce industrial clustering effect, and relax the assumption that CES preferences and assumption of there is only one production factor--labor, then a new model establish. The new model analyses decision-making behavior of multinational companies on the condition of the profit maximization. Subsequently we begin a comparative static analysis of the relevant parameters, the corresponding policy recommendations is given at last.