The Impact Of Talent Capital On The FDI Inflows To China

Under the background of the growing scale and the changing direction of foreign direct investment inflows to China as well as the increasing importance of talents, this paper based on the data of China’s31provinces and municipalities from2002to2010by adopting market size, agglomeration effect, infrastructure, labor cost, degree of openness as control variables,investigating the impact of talent capital on the FDI inflows to China via the GLS method with the use of stata.11.0across the national and regional area level respectively. This is the first time in literature to adopt Maddison formula measuring talent capital. The results show that at the national level, talent capital is negatively related to the inflow of FDI, but it is not statistically significant; At the regional level the impact of talent capital on the inflow of FDI is positive but not significant in the Eastern and also the Central China; In the Western China, however, the talent capital is negatively and significantly related to the inflow of FDI.However, at the national level, agglomeration effect plays the most important role, which is the most important determinant of attracting the FDI inflows, Market size and infrastructure are at the second and third places, both of them are positively related to FDI inflows significantly. At the regional level, agglomeration effect is still the most important determinant of FDI inflows in the East, and the comparatively developed and convenient infrastructures of the East is also an important influencing factor; the agglomeration effect in the Middle area is the most remarkable and active factor, and infrastructure is also positively and remarkably related to FDI; Nevertheless, in the West regions, market size and degree of openness are positively related to FDI significantly, apart from the remarkable impact of agglomeration effect. The results show that no matter in the east or the middle and west region, agglomeration is always the determinant factor of attracting FDI, the comparatively convenient infrastructure in the east and middle can also allure FDI remarkably,therefore, the east and middle region should lay emphasis on the improvement of infrastructures based on the existing advantage of agglomeration; the west should reduce the restrictions on policies of attracting FDI, lower the entry threshold, enhance the degree of openness in order to attract more FDI. However, the propotion and amount of talents is on the low side in China, the role of talent capital isn’t significant either, consequently, we must sequentially put more efforts into the training of high level talents.