A Study Of The FDI Technology Spillover Effect On Chinese Auto Industry

With joint investment and cooperation in almost three decades, China’s auto industry has experienced great development. On the one hand, the entry of foreign capital has played an important role in promoting the improvement of manufacturing capacity and industrial structure in China’s auto industry; On the other hand, China’s auto industry still lags far behind developed countries, especially in the core technology and innovation ability; local car makers are in the risk of "marginalization" in market and technology caused by FDI. In this situation we can bring forward corresponding countermeasures to propose the solution countermeasure by systematic study of the FDI spillover effect on China’s auto industry.The paper mainly uses a combination of qualitative and empirical research methods. First of all, the article analyses the mechanism as well as factors of technical spillover effects from FDI. Secondly, taking the auto industry as the main study object, the paper analyses FDI development in Chinese automobile including the course, the characteristics as well as the trend and so on, then analyses the effects of foreign direct investments in auto industry from the perspective of the whole industry. In the empirical part, we use two-mechanism model on FDI technology spillover effect in our empirical analysis by using data on auto industry in China from1992to2010, and results indicate as followings:the co-integration test and ECM model both show that labor productivity of foreign-funded enterprises is the primary cause of the change of labor productivity of domestic enterprises, and the participations of foreign capital is not significantly associated with the change of labor productivity of domestic enterprises. Then it comes to the basic conclusion:on the one hand, the FDI of auto industry has promoted the technology progress and industrial upgrading overall; on the other hand, the "competitive spillover effects" of FDI to domestic firms is outstanding, but the "agglomerative spillover effects" has not been fully reflected. Finally the paper proposes the corresponding policy suggestions on how to better promote and expand the FDI spillover effects and a genuine national auto industry.