A Study On The Influence Of The Foreign Direct Investment On The Upgrading Of The Industrial Structure In Hubei Province

Since the reform and open policy, Along with the deepening of economic globalization, foreign direct investment develops extremely rapidly in our country. China has become the largest developing countries to attract foreign investment. On the other hand, since the national12th five-year plan introduced, the optimization of the industrial structure has become an important way which can enhance the competitiveness of a country. While the introduction of foreign direct investment is an important measure to promote the upgrading of the industrial structure, which status and function becomes increasingly important, however, the mechanisms and the effects of FDI acting on industrial restructuring in the central and western provinces remain to be turned over. Hubei province is an important city in the central region of our country, which has convenient transportation, abundant resources and developed science, attracts more and more foreign investment. Does FDI have an effect on Hubei’s industrial structure? What extent and mechanism of FDI action on industrial structure? These issues are still the focus of our concern problems. Therefore, the paper attempts to choose Hubei Province as the research object, and measure the effect of foreign direct investment to the upgrading of Hubei’s industrial structure. It will have important theoretical and practical significance.On the basis of industry economics, theory of FDI and econometric, this paper uses the theoretical analysis, empirical analysis, qualitative and quantitative analysis to study the impact of the FDI on the Industrial Structure of Hubei. Details are as follows:The first part describes the background and significance of this paper, the main contents and research methods, the main innovation and inadequate part.The second part is the basic theory and literature review on foreign direct investment and industrial structure optimization. This section reviews the main studies of FDI and the theory of evolution of industrial structure. Then give a description of current research and make a brief commentary.The third part explains the concept of FDI, industrial structure and industrial structure optimization. Based on the factors affecting the upgrading of industrial structure, this paper analyze the mechanism how FDI affect the industrial structure in view of the capital supply and technology spillover effect.The fourth part describes the present situation of Foreign Direct Investment and Industrial Structure in Hubei province. Through analysis of the data and charts from the development process, origin and regional distribution, and the distribution among the three industries, we can find the gap and problems existed in Hubei Province in the absorption of foreign investment. The scale of foreign investment is significantly increased. Overall, the level foreign investment is low, the investment returns is poor, the distribution in the city is unbalanced, and investment is too concentrated. Then this paper analyzes the status and problems of industrial structure in Hubei province, overall, the industrial structure has been upgraded. It provides a theoretical basis for the paper.The fifth part use ADF test. Co-integration test, and granger causality test to grasp the correlation between FDI and the industrial structure of Hubei province. Then establish a linear regression model to measure the contribution of FDI to three industrial’s GDP added value, and set up endogenous technology growth model to examine FDI to Hubei’s technology advancement. We can draw the following conclusion through the empirical research:There is a long-term equilibrium relationship between FDI and Hubei’s industrial structure, and FDI is one of the reasons to industrial structure upgrades; FDI promotes obviously to the "upgrading of the industrial structure of Hubei in which FDI contributes the most to the output of the second industry, followed by the third industry, and makes the minimum contribution to the first industrial; the positive technology spillover plays the major role in technological progress of FDI,and there isn’t significantly through increase of relative productivity of foreign enterprises.In the last part of the article, on the basis of the current situation in Hubei province, and combining the analysis conclusion, the paper present guidance recommendations on how to use FDI better to promote industrial structure optimization and upgrading in Hubei province, including improve the investment environment, strengthen investment ability; improve investment quality, attract foreign investment legitimately, optimize the industrial structure; strengthen scientific and technological innovation, make full use of technology spillover effect of FDI and promote technical progress.The main innovation of this paper is to establish a specific analytical framework, which is that FDI affect the industrial structure upgrading of a regional economy in Hubei Province, not only analyzes the impact of foreign investment on the three industrial added value of Hubei province, but also from the perspective of efficient industrial structure, using the endogenous technology growth model to estimate the technology spillover effect of Hubei province, which compared with the previous scholars research is a supplement.