The Determinants Of FDI In Service In China

So far, factors influencing FDI inflows to manufacturing sector have been studied a lot by domestic and foreign scholars. However, research on such topic related to service sector has long been inadequate. The history of economic development shows service industry has taken the place of agriculture and manufacturing to play a significant role in national economy. Due to distinct structure and characteristics of each sector, influential factors in FDI inflows to service sector are apparently different from that to manufacturing sector. With China widening access to service market, service sector has become a new FDI hot spot. This thesis analyses the influential factors of China's service FDI. Particularly, investigations deep into the subdivided industries within service sector provide more accurate and more detailed theoretical basis as well as political guidelines and thereby promote overall development of service sector and national economy.Based on the previous studies, we analyze the present condition of China's utilizing service FDI, aiming to reveal existing problems and make the following analysis more focused and effective. At present, China's opening-up of service industry is still in the primary stage. A series of problems have arisen in the process of service FDI absorption such as small inflows of FDI, unreasonable industrial structure and unequal geographical distribution. We find that the reasons for these problems and relevant resolutions are closely related to the influential factors of service FDI.In order to solve the above-mentioned problems, the thesis analyses incentives for FDI in service sector, based on the inheritance and development of Eclectic Theory of International Production (OLI paradigm). For ownership advantages, we investigate the impact of product differentiation on service FDI. For location advantages, we indicate several important factors affecting service FDI, including market size, infrastructure construction, and government policy, etc. For internalization advantages, we emphasize the importance of reduction in transaction costs, standardized and web-based service.From the angle of location advantages, an empirical analysis is given in two parts, examining the influential factors of service FDI. In the first part, taking the aggregate amount of service FDI as samples, multiple regression analysis shows such factors as market size, labor costs and human capital may greatly affect China's absorption of service FDI. In the second part, collecting data from 8 sub-service industries, we study at sub-industry level with panel data models. The results indicate that for the 8 sub-industries in the empirical test, the above-mentioned factors do have an impact on attracting FDI, but the degree of influences vary from one sub-industry to another.On the basis of the above findings and in view of the characteristics shown in China's utilization of service FDI, finally we draw our conclusions and put forward appropriate policy suggestions as listed below:expanding demand for service, strengthening infrastructure in the Midwest, speeding up talent training and promoting the upgrading of service industry..