China's Industrial Fdi Spillover Effect Analysis And Empirical Testing

Spillover effect of foreign direct investment(FDI) should be the hottest topic especially in developing countries. Numbers of studies show that not all FDI in developing countries run in favor of the hosts' growth. Past papers mainly focus on the impact of characters from industries and host countries. This paper analyses spillover effect from a new perspective--Product cycle.Chapter One is a review of past papers on FDI and spillover effects. Starting from the FDI formation mechanism, we summarised development of FDI and spillover effects theories and emphasized Product cycle theory.In Chapter Two, we designed a game model to simulate the competitive process of two producers, in order to find the equilibrium. Producers' actions in equilibrium directly determine quality and quantity of FDI that a developing country obtains. It showed that industries with medium productivity spilled more than those with high and low productivity.Chapter Three is an empirical analysis of 34 industries in China, data from 1996 to 2005. Results of the empirical analysis validated the game model in Chapter Two and we provided further explainations for some representitive industries.In Chapter Four, we introduced common policies that host countries usually use into the game model, and studied the policy impacts. We tried to find proper policies to enlarge the range of industries with positive spillover effects.