Welfare Comparison On China's Undertaking Of FDI And Foreign Outsourcing In Service Industry

As global service industry develops rapidly, internationalization of service has become a significant characteristic of globalization, China, a newly emerging developing country, has gradually become part of the process as a host country. Meanwhile, booming of IT industry has diversified the modes of service internationalization: first dominated by FDI in 1990s, and then comes offshore outsourcing, the co-existing of which two is drawing the attention of academia nowadays. But the differences in their contents, industrial structures, degree of technology intensification and demand of human resources has entitled them with different welfare effects on China, and also some potential relation. This paper aims at proper political advice for China to maximize its welfare via welfare comparison on the two models, which involves mathematical and empirical analysis.Depending on introduction, the paper is divided into 3 parts: First to introduce the conceptions and differences, for analyzing the reasons of differences between their welfare effects on China; Secondly, base on Arti Grover's logic, this paper establishes a mathematical model to conduct the comparison and get a primary conclusion depending on a set of thresholds; Thirdly, to quantify the thresholds by using data of China's service industry, combining regressing analysis we get the comparing result on the perspective of whole service industry and specific service departments, in addition, the paper assumes and the proves the promotion of SFDI on offshore outsourcing, which can pose an impact on the result of comparison, and make SFDI based on FATs a necessary factor for China to introduce its undertaking policy; Above all the comparison results, this paper proposes a set of political advise for China to maximize its welfare when undertaking SFDI and offshore service outsourcing.Basing on the previous research, this paper gets several conclusions: First, differences between the features of the 2 models result in differences between their welfare effects; Second, FDI can better improve China's welfare than offshore outsourcing as of the whole service industry and traditional service departments; on the other hand, the latter performs better than the former as of the new service departments, which also result in the policy preference over different departments; Third, FDI based on FATs can promote offshore outsourcing to some extent, China can improve its welfare by boom this kind of FDI in the new service departments; Forth, human resources could be the bottleneck for offshore outsourcing to perform well in its welfare improving effect, to level up the quality of China's human resources will do good to improve the welfare through offshore outsourcing.