China And Russia Use Of Foreign Capital Compared

Both China and Russia are big countries which employed the planned economy model in the past.Now they are going through and continues to experience the course of economic reform.In recent years they have achieved a large-scale foreign investment.So,it is time to make a comparative analysis about the investment characteristics of the two countries in investment,the reasons behind which and the effects of employing foreign investment on between two countriesThis paper make a empirical research aimed to the stage of investment of a country based on Dunning's investment development position theory.The results show that in 2005, China's on the second stage,after 2005 it enter in the third stage,while Russia is still in its second stage.Therefore ,it is available to make a comparative analysis between two countries,if we choose the period which is for China before 2005 while for Russia from 1993 to the present as.At the same time,we also found that in the second stage of Russia show two characteristics:in line with Dunning's theory but need higher GDPP and in line with Dunning's theory but there is a sub.After finishing empirical testing about the investment stages,we began further research about the characteristics of FDI in two countries and the contribution of foreign investment to these two countriesThe study about the features of FDI in China and Russia shows great difference ,which puts in 6 points: the scale of FDI in China is larger than that of Russia; the factors which affects geographical distribution of FDI in China are traffic,geographic and marinal conditions while that of FDI in Russia are traffic,geographic conditions and energy. And the geographic factor in China is decreasing while that of Russia is increasing.FDI in China is mainly focus on the second industry while FDI in Russia mainly focus on the third industry.But for the Russia,the portation of FDI in the second industry is becoming larger especially in manufacturing; the distributions of the original countries of FDI in China and Russia both show near-geographic-location features.But the geographic characteristics of China has been gradually weaker,while the geographical features of Russia gradually stronger; In addition,there are significant differences about the share of investment ; the proportion of FDI in term of M & A in China is much lower than that in Russia.However,the share of FDI in total of foreign investment is much higher than that in Russia.The reasons for the difference in this two countries are important,we did the following analysis:a large quantity of FDI in China is due to multi-facts, these are: the hostal country factor,the stable macroeconomic environment,the perfect national policy,reform path.And low labor costs,geographical and cultural aspects of the endowment advantage are contributed to it.In addition, this situation is referred to government's economic policy and the open path.But now industrial clustering effect is increasingly becoming a key factor in the regional distribution of FDI in China,but for Russia theyare the distribution of energy,industrial clustering effect, innovation.The differences of distribution of FDI reflects the feature of Russia's industrial structure,the openness degree of financial markets and national government policies and different endowments.The research method of the contribution of FDI to two countries is econometric analysis,unit root test,co integration analysis,Granger tests,correlation analysis and so on.The results show that FDI's contribution to Chinese economic growth is weighted in the long-term,while FDI's contribution to Russian economic growth in the short-term;FDI benefited China's Employment between the years 1980-1995, played a media-role in the transition of employment between the years 1996-1998, and give a negative aspect on China's employment from 1998 to the date,while the FDI to Russia hawed a negative role between the years 1994-1998 and there is no significantly affect on employment between 1999 and 2006.Based on the analysis of the difference of Sion-Russia's utilization of foreign investment.At last ,we draw two pieces of conclusion .First,Russia is catching up with China in utilization of FDI .And we do a sample explanation from government initiatives,industry distribution,China's labor cost weaker advantage and and other aspects.Second the repairing of industrical structure is the most important settlement to problems in course of utilization of FDI..Finally,we put the relevant recommendations such as greatly developing service industry,making a reform to system of tax, increasing human resource qulity, improving the internationalization of China's education level and international quality,to further optimize the investment environment in China and so on.