Effect Of Foreign Direct Investment On China’s Industrial Agglomeration

In the era of globalization, foreign direct investment (FDI) enterprises serve as the important carrier of economic globalization and connect economic globalization and industrial agglomeration regions. Moreover, FDI enterprises function as bridge between industrial agglomeration and external contacts with their global network. When China’s trading industry is developing and FDI is increasing, economic resources are distributed unevenly, which result from constant growth of economy and trade liberation and further result in increasing gap among different areas. Since China’s Reform and Opening up, foreign investment functions importantly in economic development. The rapid economic development in the eastern coastal regions is strictly connected with its use of foreign investment. With their flexible organization of production, FDI enterprises spread into different regions. While absorbing local investment, their suppliers move in and settle down, thus promoting the forming and developing of local industrial agglomeration. In the process of industrial agglomeration’s contacts with the outsides, FDI enterprises play a critical part and help industrial agglomeration grows to be an open system. They also provide R&D support and internal impetus for the internal division of labor, cooperation and web business ecological environment building. In a word, the flow of FDI directly influences the rise and fall of industrial agglomeration.This thesis defines the concepts of China’s FDI and industrial agglomeration and mainly discusses the influence of FDI on industrial agglomeration by researching the connection between FDI and industrial agglomeration. By analyzing the developing phase, regional distribution, industry characteristics, and investment modes of national FDI and the types, sources, industry and regional characteristics of China’s industrial agglomeration, this thesis proposes that what makes FDI distribute unevenly and regional economic gap increase sharply is mainly caused by the regional difference. This thesis uses China’s30provincial panel data during2001～2011to establish varying-coefficient regression model to analyze the regional disparity of industrial agglomeration caused by FDI. By quoting the data of Henan’s16manufacturing industries, this thesis examines the connection between FDI and industrial agglomeration to demonstrate that different regions could take advantage of the causal-recurrent relationship between industrial agglomeration and FDI, bring in foreign investors so as to cultivate industrial agglomeration region and industrial increase pole, strengthen the related effect between FDI and local industries and attract more foreign investors to develop local economy and then reduce the regional disparity.