Research On The Relationship Between FDI Technology Level And Host Country’s Technology Progress

With the development of global economic integration, Foreign Direct Investment (FDI) has become a primary way of international capital flows. Various governments have paid more attention to FDI’s economic impact. Technology spillover between different nations has always been considered as one of main sources of technological progress in developing nations. Research shows that FDI inflows can affect host country’s economic growth as a supplementary capital. What’s more, FDI is able to improve organization efficiency and technical levels through the technology spillover, thus improve comprehensive product factors of national economy. Therefore, it can accelerate economic growth and could make the economy on the path of endogenous growth.With the advancement of reform and opening up in China and the further development of market economy, foreign direct investment has been increasing year by year. By the end of2013, China has approved745,000foreign-invested enterprises, and the actual use of foreign capital is up to$1.2trillion. China has become nation who accepts the most foreign direct investment in the world. How much contribution does FDI make to the economy development? How to further promote Chinese economy with FDI? These issues are meaningful for improving foreign investment structure, transformation of mode of economic growth and achievement of endogenous economic growth.The endogenous economic growth theory indicates that, compared with capital and labor, technological progress is the main factor to determine economic growth, endogenous economic growth theory regards technology as an explanatory variable. FDI will have long-term impact on economic growth if technology progress is endogenous.This thesis describes the relationship between FDI and technological progress of host countries. Chapter one indicates research background and significance, research method, innovations and deficiencies. Chapter two expounds literatures on the relationship between FDI technology level and host country’s technological progress. Chapter three analyzes the present situation of FDI in China. Chapter four conducts empirical analysis of the relationship between China’s technical progress and FDI’s technical level by using VAR model with data from1985to2011. The empirical results shows that high technology level of FDI significantly affects China’s technological progress, but China’s current situations of technology does not significantly improve the technological level of absorbed FDIIn the last chapter, this thesis provides policy suggestions. First, further increasing FDI technical threshold, absorbing new technology with characteristics of "high-level","precision" and "most sophisticated"; Second, improving the technical level and absorptive capacity by increasing research investment, improving education quality and developing learning and innovation capacity; Third, enhancing innovation consciousness and absorptive capacity of China; Fourth, introduced technology should adapt to China’s national conditions.