An Analysis On Motives, Influencing Factors And Economic Effects Of Eastern Enterprises To Invest In The West

With the further development of regional economic integration in China, inter-regional investment of enterprises is becoming an important driver in domestic economic growth; obviously an increasing number of enterprises from eastern coastal regions invest in West China. What are the motives for eastern entrprises to invest in the West? And what are the influencing factors and economic effects of investments? This paper cites the case of enterprises from Zhejiang province investing in the West China. Through applying theory of enterprises' interregional direct investment and theory of inter-regional capital flows and empirically analysing the motives of eastern enterprises to invest in the west, its influencinging factors and economic effects, the author reveals the basic mechanism of the investment of eastern enterprises in the West and puts forward some measures and suggestions, which could serve as a scientific basis for government decision-making and enterprise strategic choice.This paper, from the perspective of return of capital, first analyses the motives of eastern enterprises to invest in the West and unveils the paradox between capital flows and capital output efficiency at the structural level.The research finds that although the gross return of industrial capital in the eastern region is much higher than that in the western region, actually the rate of capital return in some industries in the West is higher than that in the East, like the textile industry, the agricultural product processing industry, the drink manufacturing industry, the colored metalliferous ore selection industry in the West which are also key industries for the eastern capitals to invest in.With the structural high return of capital, there are endogenous drives and incentives for eastern enterprises to invest in the West. The paper makes an empirical research on the investment data of Zhejiang enterprises in five western provinces and autonomous region from year 2001 to 2008 and the findings show that the main determining factors influencing eastern enterprises' investment in the West are conditions of social investment in fixed assets in the West, labor cost, transportation infrastructure and governments'preferential policies for attracting investments. In the paper, the author takes Chongqing City as an example, empirically analyses four economic effects generated by Zhejiang enterprises' investments in Chongqing which are economic growth effect, production efficiency effect, industrial structure effect and employment effect and finds that of them, economic growth effect reaches 0.23 percent and production efficiency effect arrives at 0.434 percent. Finally, a typical inter-regional case of Wenzhou Aokang Group's investing on Chongqing Western Shoes Town is adopted and a thorough analysis on investment motives and achievements is also conducted.On the basis of the above research, the author proposes the following measures: for eastern enterprises, the strategic investment in the West should be directed to those industries where the West has comparative advantages; for government departments, the western governments should actively undertake the industrial transfer from the developed East and according to the local industrial strucutre carefully select industrial capitals from the East, especially attract investments to those industries whose return of capital is much higher than that in the East. The eastern governments should scientifically guide the shifting of industrial structure and attempt to achieve the smooth gradient transfer of traditional industries. And the central government should strengthen legislation to safeguard the investment in the West, aiming to encourage eastern enterprises to invest in the West.