The Research On The Effect And Government Regulation Of FDI In China’s Automobile Industry Based On Industry Security

As a pillar industry of economic development, China’s automobile industry hasplayed an important role in the advance of China’s economic construction and theimprovement of people’s living standard. Across the development of China’sautomobile industry, we easily find that the rapid development of China’s automobileindustry is inseparable with the utilization of FDI. At the early stage of thedevelopment of China’s automobile industry, FDI not only brought capital andtechnology, but also advanced concepts and management experience of modernautomobile enterprises. Especially, the accompanying mode of production andmanagement of joint venture set an example for the future development of China’sautomobile enterprises. But there are always two sides of everything. FDI, as a"double-edged sword" to China’s automobile industry, has also brought some negativeeffects, especially when the utilization of FDI increases gradually, resulting in somethreats to the security of automobile industry. Therefore, a relatively complete andsystemic study of FDI utilization based on the security of China’s automobile industryis necessary.Based on the theories of industry security and utilization of FDI, this paperestablishes the research framework about effects of FDI, and according to methods oftheoretical analysis and empirical analysis it analyzes the effects of utilization of FDIin China’s automobile industry. In the part of theoretical analysis, this paper analyzesthe mechanism of motivation of FDI from capital formation, technological progressand structural adjustment, coming to the conclusion that utilization of FDI improvesaspects of capital, technology and structure in the host country. Following the analysisof motivation, this paper analyzes the mechanism of action of FDI to industry securityfrom extrusion of capital, barriers of technology spillover and unbalance of structure,coming to the conclusion that unlimited utilization of FDI could pose a threat to thehost country’s industry security. In the part of empirical analysis, this paper analyzes the effects of FDI in China’s automobile industry based on industry security withqualitative and quantitative methods. Firstly, this paper with official data of China’sautomobile industry use index to analyze positive and negative effects of FDI inChina’s automobile industry, especially negative effects, including effects of extrusionof capital, barriers of technology spillover and control of market. Next, this paperestablishes models of extrusion of capital, barriers of technology spillover and controlof market. Using official data in China’s automobile industry from1992to2010, thispaper with econometric method calculates that the level of capital effects of FDI inChina’s automobile industry is0.002483, that the level of technical effects of FDI inChina’s automobile industry is0.002483and that the level of market effects of FDI inChina’s automobile industry is0.387170, respectively reflecting function of capitalextrusion to local capital in China’s automobile industry, function of spillover’sbarriers to local enterprises in China’s automobile industry, function of control tolocal market in China’s automobile industry. Based on qualitative and quantitativeanalysis of the above three aspects, this paper comes to the conclusion that theutilization of FDI in China’s automobile industry has harmed the security of China’sautomobile industry to some degree. So the reasonable government regulation of FDIin China’s automobile industry is necessary.After the conclusion of FDI’s threats to China’s automobile industry, this paperbased on the theories of government regulation analyzes the government regulation ofFDI in China’s automobile industry, including the analysis of cost and benefit ofgovernment regulation of FDI in China’s automobile industry, establishing thecost-benefit model of government regulation. Finally, this paper initially constructsthe framework of government regulation of FDI in China’s automobile industry basedon industry security, including the objective, principle and content of framework.More importantly, this paper makes systemic arrangement of framework, includingFDI police and competition police of automobile industry, and system of censorshipand transaction of M&A of automobile industry and other relevant police.