The Impact Of Foreign Direct Investment In China's Car Industry Market Structure

In process of Chinese reform and opening-up, the foreign direct investment (FDI) has entered into Chinese car industry extensively. The FDI has entered into car industry for about 25 years since 1983. During this period, the FDI had a great impact on the development of our country's car industry. This paper aims to research the FDI'S effect on the market structure of car industry on base of the industry organization theory and the international direct investment theory. By comparing and analyzing the change of Chinese car industry market structure before and after the entry of FDI, this thesis tries to make a concrete analysis of the effects of FDI on the market concentration degree, entry barriers and scale economy of Chinese car industry. The conclusion includes four aspects. First, the market concentration degree of car industry will suffer N shape transformation under the effect of FDI, and it is declining now. But the market concentration degree of car industry will ascend again after the inferior position corporations eliminate through selection or contest in the long term. Second, foreign company has capital, technology and management advantage, so foreign company entering our nation can built technology and diversity of the product barrier in China market. Third, FDI improve the organization structure of car industry, the production cost of some car factories have declined sharply. Last, the entry of foreign capitals has improved the competitiveness of domestic car enterprises and the whole industry. FDI that optimized resource allocation is favorable to the improvement of economic efficiency. Both the government and the car enterprises should take useful measures to form oligopoly market structure in car industry. Car enterprises in China should import and master the key technology through cooperating with the foreign car enterprises. At the same time, they should make good use of their own resources to foster independent brand. In order to promote the competitiveness of the Chinese car industry, the government's policy to deal with the entry of FDI into Chinese car industry should combine proper protection with positive promotion. From the aspect of keeping the prosperity and efficiency of the market economy, proper protection and measures to prevent monopolization must be given to the car industry by the China government to promote the efficiency of FDI.