Study On The Threshold Effect Of Technology Spillovers From FDI In China

Since the reform and opening up, China has obtained rapid economic development and becomes a key member of globalization. With the rapid expand of market, the scale of FDI our country attracts is also growing step by step. Without doubt, China is the most popular country in the world. Although the total amount of FDI is very considerable, it presents a state of imbalance in its distribution. Moreover, although the large scale of foreign capital makes up for the lack of funds and technology in China, it also has negative impact on our country. First of all, with the increasing inflow of foreign capital, the pressure of environmental and resources begins to emerge. Secondly, the large amount of FDI causes the rapid growth of China’s foreign exchange reserves, challenges the balance of international payments. Most of the people hold positive attitude towards FDI, but still those who take negative view. Whether will it change due to the difference of industries? Or whether will it change because of the difference of industry? The paper used 35 industries’ panel date to make threshold regressions, which has a certain practical significance.To begin, this paper lists the related literature review at home and abroad about the technology spillover of FDI. Which including the paths and mechanism of FDI technology spillover, namely how domestic enterprises obtain technology progress from foreign investment; the technology spillover effect exists or not; its related factors and the related literature about the threshold effect. Then it introduces the current situation of FDI in China. Firstly, a brief introduction of FDI globally has been presented, since the financial crisis in 2008 and the sub-prime crisis, the economy got into a soft patch with the larger fluctuation. The FDI recovery is bound to a long and difficult process. Secondly, it analysis the overall situation of FDI in China, including the overall trend of China’s FDI, and in 2014 it successfully overtook the USA to became the country which attracts the most foreign capital. Both of the industries’ distribution and regional distribution of FDI in our country present a disequilibrium state.Empirical part is the core part of this article, this article selected four variables as threshold variables:export dependence, enterprise scale, technology gap and r&d. Total Factor Productivity (TFP) is chosen as the index of technology spillovers. This article used China’s 35 industries’ panel data from 2001 to 2012 as samples, and did the threshold regression with the above four variables in turn. We can find out several threshold values of technology spillover, and they do have effect on the threshold effect of FDI. Especially, the enterprise scale and technology gap both have a double threshold. They are monotonous and both present positive effect after passing the high threshold value. Through the threshold regression, the paper analysis 35 industries’ present situation in 2012, which in turn determines the threshold of the state. According to the empirical results, finally, the paper gives several suggestions, namely, what the government should do when introducing FDI:to pay attention to the quality of foreign capital, to optimize industrial structure of FDI, to increase the investment of r&d, to improve the ability of absorption of FDI, to optimize the export scale and to expand the scale of the enterprise reasonably.