The Effect Of Foreign Direct Investment On The Income Gap Of Services In Guangdong Province

Since the reform and opening policies, the economy of China has been growing at a reallyimpressive, and the national income also showed a rapid growth trend on the whole.Guangdong Province, near Hong Kong and Macau, with its excellent location and one stepahead of reform and opening policy, sustained and rapid economic development, has becomeone of the most populous provinces to attract foreign direct investment in China over theyears. It’s12.9%on average annual GDP growth rate in Guangdong Province in the lastdecade. Besides, it also maintained a rapid increase in foreign capital inflows and rapidincrease in total income of residents in the province level. However, there are also manyproblems. The inflows of foreign capital in every industry of Guangdong Province aredistributed very unevenly and the industry income distribution gap is also widening.By carding the existing related theory of influence of FDI on income gap, this articleelaborated the basic viewpoints and theories on the domestic and foreign research. It alsoanalyzed and discussed the mechanisms of the impact of FDI on income gap that based onsome different perspectives which included the employment effect of FDI to the labormarket, technology spillover and foreign trade effects of FDI. For reference, this paper tookthe service industry of Guangdong as an example to analyze the impact of FDI on theincome gap between industries.FDI inflowing to Guangdong Province whether have an impact on income gap of service, theeffect is positive or negative? What channels are through on the influence of Guangdong’sFDI to the income gap between its services sector? This paper is focusing on the said seriesof questions. The article has made a in-depth analysis on the aspect of the measures andinfluence mechanisms. And then to response to the above-mentioned issues, this article hastaken an empirical analysis by using relevant statistical data of Guangdong Province from1995to2010.Study results show that the amount of FDI and wage of service industries in GuangdongProvince are showing a significant upward trend, but FDI distribution of industry that gothigher level is not much. It means FDI inflows did not widen the income gap betweenindustries. From the result of the service industries’ income distribution of probabilitydensity function, the remuneration of service industries are making continuous increase, atthe same time the income gap has been widening. Through the conclusions of the empiricalanalysis, FDI played an inhibition part on the expansion of income gap of service industries in Guangdong Province, and domestic investment is the main reason for the wideningincome gap between the industries.