Analysis On The Influence Mechanism Of Environmental Regulation And Industrial Agglomeration To Location Choice Of FDI

The competition among regions to attract foreign direct investment is getting fiercer and fiercer under the economic globalization. As one of the top FDI inflow countries, China has experienced more than thirty years of rapid economic growth. FDI mainly concentrates in the eastern coastal area, descends to the central and western area. In the development of different regions, we found that Guangdong and Jiangsu replaced the polluting industries with advanced industries, by the name of "change birds in the cage"; meanwhile some area in the Midwest China appeared to undertake the replaced industries from the east, named "undertake the transfer". This paper starts from these two phenomena, aims to explore the industrial agglomeration transfer mechanism among different regions caused by FDI.First of all, this paper expounds the present situation of the development of FDI in China, including:the emergence of the "change birds in the cage ","undertake the transfer"; FDI still maintains a rapid growth momentum; FDI tends to concentrate in some area; different governments take different "tricks" to attract FDI; the negative impact of FDI on China’s industrial structure and regional economic structure. Then, based on the present characteristics of the industrial transfer theory and the theory of location choice for FDI, we find that local government’s behavior plays a decisive role in industrial agglomeration-transfer process which is caused by FDI. Though the model analysis, it comes to the conclusion that behavior mechanism of local government is reflected in two ways:first, when the government allocates its limited inputs, it tends to promote the economic growth directly. Because the provision of infrastructures or good environment works on the economic growth is indirect. Second, the local government’s behavior at different economic development stages is not the same. When local residents’ income is higher, the local government tends to pay more attention to environmental governance investment and other public goods. It will not being in the blind pursuit of GDP growth.Subsequently, this paper uses two core explanatory variables--environmental regulation intensity of local government (a measure of the local government behavior) and the local industrial agglomeration (a measure of the local industrial agglomeration degree) to construct the measurement model to explain different place’s FDI attractive problem. Then, we take China’s and the eastern, middle, western data into the verification. We are more convinced:the behavior mechanism of local government is different in different economic development periods. When the local economy is at low level, the government and residents are eager to attract foreign investment to develop local economy, improve the level of industrialization, and they can tolerate the decline of local environmental quality to a certain extent. When the local economy reaches a certain level, local residents are relatively wealthy. The marginal utility they get from rise of the income decreases gradually; the marginal utility they get from the improvement of the environmental quality increases gradually. So at this stage, considering the rise of the pollution control costs and the strength of the local economy, the government abandons polluted enterprises gradually. Therefore,"change birds in the cage ","undertake the transfer" are "rational choice" for different local government at different economic development periods. Finally, the article puts forward some policy recommendations:effective supervision of the local government’s behavior; improve investment structure, optimize the industrial level; make sure of the region’s own characteristics, find out a focus industry; encourage enterprises to "go out".