How Does FDI Affect Chinese Industrial Upgrading

Since the 40th anniversary of the reform and opening-up,China' s industrial structure has been optimized continuously,and the heavy industry accounts has been continuous improving,which is consistent with the research results of hofmann,and also accords with other mature industrial structure upgrading theories.At the begin-ing of reform and opening up,the domestic economy was weak,and the elements of industrial development,such as capital and technology,were extremely scarce,while the labor factor was very rich because of the surge in population.This contrasted shar-ply with the major developed countries in the world.Thus there were comparative ad-vantage,which provided the economic condition for the foreign direct investment(FDI)to enter China.The entry of FDI is closely related to the vigorous development of the Chinese economy.In the initial period,it not only brought the capital elements in China,but also brought out the technological factors and management elements that developed countries have eliminated but are still leading in China.In the same time,a large number of skilled workers have been trained for China.Based on these considerations,this paper starts the research of FDI on China's industrial upgrading.There are different opinions about the industrial upgrading effect of FDI,but it is undeniable that FDI is closely related to the development of Chinese economy and the rise of industry.However,with the adjustment of the economic stru-cture,the economy is gradually changing from the stage of high-speed growth to the stage of high-quality growth.The level of technology eliminated from abroad can no longer meet the needs of China's industrial upgrading.FDI seems to have a weaker and weaker impact on China's industrial upgrading both in terms of workers' skills and management experience.This paper summarizes the theoretical achievements of scholars at home and abroad in promoting industrial upgrading,divides them into spi-llover effects and inhibitory effects,and constructs a theoretical model of FDI influe-ncing industrial upgrading based on Cobb-Douglas function,and puts forward the res-earch hypothesis that the industry heterogeneity of FDI can influence industry upgra-ding.Based on the input-output data of China from 2003 to 2014,this paper calculates the service index of manufacturing industry to measure the index of industryial upgra-ding,and then makes an empirical study on industrial upgrading by using FGLS model.Finally,the robustness test is carried out using the total factor productivity index.The results show that manufacturing FDI and producer service FDI have different mechanisms for industrial upgrading.Before the financial crisis,FDI of man-ufacturing industry has always maintained a positive role in promoting industrial upg-rading,but the direction of FDI in producer services is not very clear.After the finan-cial crisis,the promotion effect of manufacturing FDI on industrial upgrading will be strengthened.However,the promotion effect of producer services on industrial upgr-ading will weaken or increase the low-end locking effect.