A Study On The Crowding - In Effect Of FDI On Host Country 's Investment

Since the1970s, driven by international trade and investment, globalization has been showing its expanding trend.Lots of other economies also benefit from the wave of globalization,although which is promoted mainly by the western countries.During the past three decades,China,as one of the biggest beneficiary countries,has grown as the second largest economy from one of poorest countries.In2013,China has replaced the US as the world first place on the volume of import and export.Also,in recent years,China attracts foreign direct investment more than100billions annually.During this period,the theory of international trade and investment has got its rapid development.The most studies focuse on the positive effects,such as economy growth, technology spillovers,employment,which the FDI brings the home country and the host country.Compared with the macro research,the FDI micro mechanism research attracts less attention.In1999,in its annual "World Investment Report",the UNCTAD began the research of the crowding-in effect and crowding-out effect of FDI under the perspective of financial efficiency,industry characters etc in the host country.This article is trying to analyze the mechanism of crowding-in effect and crowding-out effect of FDI on micro level and maso level.By three channels,technology spillover channel,market expansion channel and market stealing channel,multinational corporations affect the production and investment of internal industry manufacturers. For those upstream industry manufacturers, multinational corporations affect its production and investment through product purchasing and vertical spillover. For those manufacturers in downstream industries, multinational corporations,which own the technical or financial advantage,take their impacts by providing cost-effective intermediate products or services.On the basis of theoretical analysis, the author attempts to study the crowding-out effect or crowding-in effect that FDI bring industry in China by case analysis,and this paper selects the automobile industry and auto parts industry.On the one side,the amount that the FDI comes into China’s automobile industry is in a such large scale that technological spillover effect and competition effect are all obvious.On the other side,the auto parts industry,as the upstream industry of the automobile industry,has strong association with the automobile industry,and the crowding-out effect or crowding-in effect is easily observed between industries.The result shows that FDI brings China’s automobile industry absolute crowding-in effect, but relative crowding-out effect. Before the analysis, this article summarizes the characteristics of FDI that comes into China since1978from three aspects,the geographical features and scale, industrial distribution of FDI, R&D investment features.At the end of the article,the author briefly collate and summarize the whole research.Also,the article discusses the possible reasons that the FDI brings crowding-out effects because of FDI policies of China,"super-national treatment" of FDI and access policy of FDI,and hopes to lead to more thinking.