Effect Of FDI Inflows On The Regional Human Capital Development In China

Since the reform and opening up to the outside world, China has been one of briskest countries attracting FDI. FDI inflows increased fund accumulation and brought about spillovers among which employee-training and human capital spillover through competition and imitation are the important points to China. Human capital is a great contributor to the national economy. Whether FDI inflows increase the human capital accumulation will play an important role in the sustainable development in future.First, the fact is that there is an unbalanced distribution of FDI inflows to China. Most of FDI inflows go to the eastern developed region and the western undeveloped region holds much less. As for the unbalanced distribution, there must be some different influence on human capital development.Second, the author analyzed the human capital development and FDI inflows to the two regions for contrast, and then expounded from the theoretic prospective the mechanism and influencing factors of FDI promoting the human capital. FDI, by directive channels such as education and training, increases human capital supply of the host country and promotes its human capital development; FDI, by indirect channels such as signal mechanism and spillover effect increases human capital demand of the host country and upgrades the skill of the employees in the host country. The capability of attracting FDI, the market level, and the local companies' status affect the human capital spillover of FDI inflows.Then, the thesis by the inter-period and inter-region analysis, empirically verified the effect of FDI on average years of schooling by panel data from 1988 to 2007 of every province. The result showed: FDI has a positive and significant impact on the average years of schooling; the influencing strength is increasing with time. Adding the dumb variable of region for further study, the analysis showed the coefficient of FDI on the average years of schooling is more significant in the eastern region of China than in the western region. The paper made a further analysis by using senior middle school enrollment and tertiary school enrollment. The finding showed: to the two regions, the effect of FDI inflows affecting human capital development is different; FDI has a positive and significant impact on the senior middle school enrollment in both parts, but the result is more influencing in the eastern part; the coefficient of FDI for the tertiary school enrollment is positive and significant in the eastern region, and is negative, but not significant in the western region.In the end, through summarizing the conclusions, the paper put forward some valuable proposals such as improving the foundation of human capital development, strengthening the construction of spillover channels, and optimizing the level of introducing FDI to promote human capital development by utilizing FDI.