A Studv Of The FDI Spillover Effect In China’s Automobile Industry

The research about FDI spillover effect mainly focuses on industries from a macro-economic view, most researches favor spillovers within industries (horizontal spillovers). And the research for a single industry is much more less. Automobile industry is a strategic pillar industry, because it has so close and widespread linkages with other industries, so it has great meaning doing research about it. On the basis of other scholars’research and combining theoretical analysis and a empirical test, this paper explore the exact influence FDI has upon our country’s automobile industries. Meantime we classify vertical spillover effect and horizontal spill effect. First of all, we briefly introduce industrial characteristics, product classification and linked industries of the automobile industry; second of all, we use theoretical analysis to make it clear how FDI functions after pouring in our country’s automobile industries, then we use a empirical model based on labor productivity to see how much the FDI has influenced this industry, after making Johansen test, we regress all the variables and we use the vector correction model to weigh the influence of variables’ changes in the short run, also, we did the Granger causality test to see the causal relations between the variables; in the end,we offer advice to the government and the firms.The results conclude that FDI in our county’s automobile industry has a positive effect overall. And the horizontal spillover functions in two opposite directions:the more the foreign output, the lower the domestic productivity; the higher the foreign technology level, the higher the domestic productivity, it’s probably because of the crowding out effect. The vertical spillover is dramatic due to the industry’s strong linkage effect, and the forward vertical spillover is less than the backward spillover effect, one reason is because the backward industries is much more important for the automobile industries, another reason is that the automobiles are becoming ultimate consumption commodities, pouring into more and more common families.