| Absorption of FDI is one of the most important measurements of China’s economic reform and China’s great achievements in economic and social development in recent 30 years. Several factors decide the flow of FDI, including industry factors, especially Manufacturing in China. So, the analysis of the impact of industry characteristics on FDI in China can not only enrich the theory of FDI in China, but also provide reference for further optimizing the foreign investment policies.The paper selects the size of the market, asset intensivity, allocative efficiency, labor costs, firm size, growth in the number of enterprises, the share of state-owned enterprises and other major industry characteristics to empirically test their impacts on FDI in China’s 36 manufacturing sub-sector. Evidence shows that the distribution of FDI in China’s manufacturing industry sub-sectors highly related to industry characteristics. So, it’s available to promote China’s industrial structure through the regulation of industry characteristics and their distribution.Based on empirical results, the paper argues that:First, investment opportunities in different sectors of China is an important pull factors of FDI. Preferential foreign investment policies can be applied as supporting measurements, but not as fundamental factors to attract FDI. Second, the regulation of the industry characteristics is one of the most important measurements to regulate the distribution of FDI. That means the government can adopt policies to stimulate or limit specific industry factors to more effectively guide FDI to expected sectors, and gradually optimize FDI stocks in different sectors. Third, the impacts of industry market size on the inflow of FDI is not significant. That means the impact of China’s domestic market size on FDI is limited, in comparison to other factors. Therefore, the government should take active actions to formulate a system to encourage manufacturing enterprises to rely on domestic demand. |
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