Influence Of FDI Quality On Overcapacity

In the new economic era,overcapacity has become a stumbling block to the sustainable development of China's economy.In the government performance evaluation mechanism,local government vicious compete in the course of introducing foreign capital,who focus on the amount of foreign capital and pay little attention to quality of foreign investment,while FDI with different quality have quite different effects on the overcapacity of host country.There are little theoretical research on the influence of FDI quality on overcapacity.Therefore,it is of great theoretical value and practical significance to study the influence of FDI quality on China's overcapacity.By reviewing the related literature and focusing on the theoretical mechanism of the influence of FDI quality on overcapacity,this paper pointed out that the high quality FDI will help make up for the "technology gap" of host country,inject new vitality for the industries of the host countries,enhance her overall production and marketing level,influences the technology and management level,the level of human capital,the mode of production and management,the ability to export as well as the industrial structure of the host country,improve the productivity of enterprises through the demonstration,competition,personnel flow and industrial association effect indirectly,promote the host country industrial structure upgrading and optimization,stimulate consumption and exports,and eventually resolve excess capacity from the production side and consumer side.FDI will increase the level of investment of the host country.Low tech FDI may form duplication or excessive investment in the host country,which can lead to the problem of excess more serious.By using the data of 33 industrial sectors of China,the paper calculates the overcapacity and FDI quality index of different industries in 2003-2014,analyses the development of the sample from overcapacity and FDI quality in our country,and use two step system GMM method to carry on the empirical research from three aspects:the whole industry,heavy overcapacity industry and light overcapacity industry.The results show that:FDI quality has a significant and stable effect on excess capacity whether the industry as a whole or sub industry type.Improving the quality of FDI is an important way to alleviate industry overcapacity.A slight increase in the quality of FDI will significantly reduce its overcapacity situation for light overcapacity industries.As far as control variables are concerned,the amount of foreign investment stock,the amount of domestic investment and the government intervention are not conducive to the solution of overcapacity,and the increase of export proportion will lead to a decline in the index of overcapacity.Finally,according to the results of theoretical and empirical analysis,this paper comes up with some policy implications for alleviating the problem of overcapacity in China and seeking the sustainable development of economy:We should(1)control the number of FDI and sublimate FDI quality,use high quality FDI to drive domestic enterprises to resolve overcapacity.(2)focus on FDI technology and management level,establish capital entry threshold system to improve the technical content of foreign capital.(3)enhance the scale of foreign enterprises,prompt FDI enterprises to form the internal economies of scale and external economies of scale.(4)improve the localization degree of FDI.(5)focus on the effect of foreign investment on domestic enterprises.(6)expand the export of domestic enterprises with heavy production capacity.