Empirical Research On The Effect Of FDI On China’s Industrial Enterprises’ International Competitiveness

Industry is of importance in a country’s economic development, which is even more so for developing countries. Being crucial to the upgrading of a country’s overall strength, industrial development is considerably dependent on the improvement of industrial competitiveness. It is generally accepted internationally that Industrial Competitiveness (IC) is a country’s ability to produce and export manufactured goods competitively. As is a considerable factor in measuring a nation’s international competitiveness, IC has been greatly focused on among the academic communities. China has been implementing policies that help it absorb direct investments from multinational corporations since its reform and opening-up policy. Over decades, FDI has been gradually expanding in China and recent years have even witnessed China ranking in the lead globally, in terms of the scale of FDI absorbed. Meanwhile, in the released reports by the UNIDO and the World Bank, China’s IC ranking has been ascending ever since the1980s, from the fiftieth and sixtieth to the fifth in2009. Also, analyses of empirical evidence in previous literatures have indicated possible interrelationships between the expansion of FDI in China and the rise of China’s IC ranking worldwide. This article is meant to verify those interrelationships with empirical models based on economic realities. Referencing perspectives and methodologies in the reports of UNIDO, we have quantified IC from aspects including technological complexity as well as export ratio, so as to turn the notion of IC into indexes that are suitable for empirical analysis. Besides, we have also considered other influencing factors for IC such as human capital, research and development and infrastructure construction.We do have verified the positive effects FDI has on China’s IC. In the meantime, we have found out that structural changes of IC over time can mostly be explained by research and development. Moreover, we have derived several policy proposals so as to take advantage of the positive factors and further enhance China’s industrial competitiveness.