Empirical Analysis On The Impact Of Foreign Policy On FDI Quality

The main purpose of this paper is to explore the relationship between China’s foreign policy considerations and FDI quality, and then propose some adjustment recommendations of quality and efficiency-oriented foreign policy on this basis. Firstly, the article analyzes the changing nature of international investment trends after the financial crisis, pointing out the need to improve the quality of FDI. Then using the final asking price arbitration game theory model, author concluded theoretically that the FDI quality chosen by foreign direct investors under the policy constraints is higher than the FDI quality chosen by foreign direct investors completely under profit maximization constraint. Then author estimated the impact of foreign policy using theoretical methods. After that the author selected the provincial panel data from2003to2012, and selected five indicators to measure the foreign investment policy system including foreign preferential policies, encourage extent of foreign exports, control extent of foreign imports, the degree of pollution control and the attitude towards FDI policy. After that, the paper analyzed the impact of foreign policy on the quality of FDI empirically distinguishing between different regions and time before and after the financial crisis, the results showed that the policy objective can take effect on the quality of FDI more easily after the financial crisis than in the past. It also shows the impact of foreign policy on the quality of FDI is more significant in China’s western region than in the eastern and central regions. Finally, on this basis, the article proposed hierarchical, systematic recommendations from regional policy, industrial policy, management and supervision, optimization of investment environment and the co-ordination with other policies.