An Analysis Of FDI To Zhejiang Province

Nowadays, the rapid development of FDI indicates the continuous deepening of the economic globalization and the financial globalization. Since China has implemented reform and open policy, which leads to the rapid development of foreign direct investments in China .Seen from the statistical data, China's FDI inflows in 2008 has increased by 30%, as much as 1080 billion dollars, ranking China as the third largest country of absorbing foreign investment around the world. has proved that China is the world's most attractive investment place once again.Province Zhejiang is one of the earliest ones that carried out reform and open policy. During the process of the development of the market-oriented economy, Zhejiang has formed its own advantages and characteristics, which lead its economic development and made it become one of China's most dynamic provinces. Not only did Economic globalization bring opportunities for development in Zhejiang Province, but also presented serious challenges, particularly for global competition which causes great pressure. As for attracting and utilizing the foreign investment, researching FDI of Zhejiang Province will be beneficial to a big extent.Since reform and open up policy being implemented, FDI to Zhejiang Province has developed from scratch, after which it began creating its flourishing future prospect of FDI. The development of foreign direct investment can be divided into the following four stages: 1) the slow start phase (1980 to 1991), FDI grew from scratch, doubling the amount of the last period in successive years. However, the low base number and small total amount of foreign investment made the impact on the economy limited as well; b) the rapid growth phase (from 1992 to 1996), 1992,after Comrade Deng Xiaoping's speech during his southern tour ,China's open up policy advanced fast, FDI to Zhejiang Province has been sprung up as mushroom; c) back adjustment phase (from 1997 to 2000), affected by the Asian financial crisis, foreign investment significantly shrunk the size; 4) comprehensive development phase (since 2001), opening up of Zhejiang Province has stepped into full participation process in international economic cooperation and competition. FDI in Zhejiang Province has showed trend of rapid development. Since 2008, affected by the international financial crisis, Zhejiang contractual and actual foreign investment has been in a downward channel, but the rate gradually slowed down in 2009.Foreign direct investment grew faster in Zhejiang, and the level has been much higher than the national average one. Among all of the foreign investment, HK investment accounted for half of the total amount, which has always ranked first, but the downward trend has been seen in recent years. In terms of FDI from different industries, the amount of FDI to advanced manufacturing, modern services and high-tech industry has increased year by year. The structure of foreign investment was further optimized, playing an important role in the process of driving the tertiary industry going forward significantly. As for the forms of FDI, cross-border M&A has been regarded as an important one of foreign investment, premium M&A has increased significantly. A Majority of developing areas are willing to exploit foreign investment. The problems that FDI in Zhejiang has too little focus on investment sources, the scale of investment in three industries has uneven condition and geographical distribution of investment is extremely uneven have been remained to be solved.The practice of reform and opening up has proved that FDI to Zhejiang has benefited the development of economic growth in Zhejiang. Foreign direct investment is an important source of investment in fixed assets, especially for the situation where construction funds were inadequate at the beginning of reform and opening. FDI helped to slow the problem of insufficient funds. Foreign-invested enterprises are important sources of revenue as well. Foreign-invested enterprises in Zhejiang Province have increased revenue year after year, accounting for revenue's continued increase. Foreign direct investment has created numerous employment opportunities, improving the quality of province employment from labor force level, skill level and some other aspects the like. Foreign direct investment will bring advanced technology and management experience, which makes the positive effects of technology spillovers exist. Foreign direct investment urged local enterprises to improve technical efficiency by local enterprises'demonstration effect of advanced technology, marketing strategies and management concepts, with the fierce competition among local businesses along the process; by training staff from subsidiaries in Zhejiang Province, multinational companies have optimized the quality of the local labor force; By establishing the association between foreign-invested enterprises and local ones in Zhejiang Province, local businesses will participate in the industrial chain of foreign-invested enterprises .Through referring to their advanced quality system and production technology, the local businesses can enhance their own production technology and labor productivity . Generally, FDI has promoted industrial restructuring and upgrading of Zhejiang Province, expanding the scale of international trade and enhance international competitiveness of goods from Zhejiang.As more and more foreign direct investment flows into Zhejiang, foreign investment has increasingly shown the negative influence on the economy. The FDI's structural imbalances have aggravated the industrial imbalances of Zhejiang, leaving behind the problems that primary industries have insufficient investment, secondary industries have formed not only highly dispersed but also low-level structure and tertiary industries have the irrational structure such the like, which will objectively aggravate the inconsistency and contradiction of China's industrial structure. The regional imbalances of FDI unbalanced development of regional economy in Zhejiang. FDI focus foreign investment on the east parts, which widens the economic gap between east and west. Depending on the advantages of technology, capital and scale, Foreign-invested enterprises occupy or even monopolize the whole market, shrinking market share in local enterprises, causing insufficient inputs of R&D and slowing down the independent innovation. The introduction of technology can easily cause enterprises'reliance on foreign advanced technology. As things go on like this, China's enterprises will be less innovation initiative in the future development. Industrial pollution from foreign direct investment will do harm to ecological environment in Zhejiang. Developed countries introduce high-polluting industries into China by multinational enterprises, producing hazardous waste, gas and the like, which will result in environmental degradation and unsustainable economic growth in some areas of our country. Cross-border M&A also made the core technology of enterprises in Zhejiang controlled by foreign investment, diminishing the state-owned brands of Zhejiang. Meanwhile, multinational companies penetrated industries in the province by M&A, leaving behind a serious threat to our province's industrial safety. As more and more foreign investors seeking for absolute control of enterprises, micro-foundation for the formation of a monopoly has been remained. Once stepped into the 2l century, international and domestic changes have brought new opportunities and challenges to the attraction of investment in Zhejiang. In order to meet the new requirement and utilize foreign investment efficiently, thoughts about investment attraction and utilization must be renewed. Development and implement of the right strategies and measures cannot be ignored as well. Zhejiang Province still need strike a balance between foreign investment's quantity and quality. Zhejiang must improve the comprehension about the importance and urgency of utilizing foreign capital, creating a more attractive environment for foreign investment. Improve the investment environment by focusing most attention on soft environment, on the basis of emphasizing the construction of Hydropower, transportation and communication environment. Improve administrative efficiency, create a clean, efficient administrative environment and a unified standard policy environment; optimize sound laws and regulations, establish a complete and fair legal environment; build a fair and open market environment; increase investment in education, personnel training and introduction. Utilize foreign capital's industries and regional orientations properly, improve the investment structure and promote Zhejiang industrial and regional balance in development. Optimize the industry clusters and enhance industry concentration level. Support and encourage enterprises to improve their ability and the level of innovation competitiveness. Innovate the ways of foreign investment, promote cross-border M&A, offshore financing and venture financing. Improve laws and regulation conditions; strengthen supervision and management of foreign direct investment.Foreign direct investment's introduction is a "double-edged sword." It brought positive effects, quicken economic growth, etc. however, negative effects can be seen as well. The economic development of Zhejiang is bound to rely on foreign capital. Zhejiang Province must minimize the negative influences through adopting effective strategies to maximize the positive influences of FDI, and promote rapid economic development of Zhejiang.