The Analysis Of The Relationship Between FDI Spillover Effects And Markups Of Manufacturing Enterprises In China

The introduction of foreign investment is one of the important contents of China's basic national policy of opening to the outside world.The government has actively introduced foreign capital through land and tax incentives,especially since it joined the WTO.With the relaxation and reduction of the barriers to entry for foreign investment in various industries,China's appeal to foreign direct investment has been continuously increasing.As of the end of 2014,the scale of China's foreign direct investment surpassed that of the United States and became the country with the largest inflow of FDI.However,whether large-scale FDI can form a positive spillover effect on China's manufacturing industry,thus promoting industrial upgrading and enhancing its core competitiveness remains a topic discussed extensively by scholars and the government.This paper calculates the markups of Chinese firms using the method provided by De Loecker and Warzynshi(2012).The main data used in this study are from the Annual Survey of Industrial Firms,conducted by the Bureau of Statistic of China for 2000-2007 period.On this basis,we study the impact of FDI spillovers on the markups of Chinese manufacturing enterprises,at the same time,we take into account the possible endogeneity of foreign enterprise entry.In addition,we use the econometric methods to analyze the relationship between the FDI spillover and markups.The study finds that there is a significant negative spillover effect of FDI on enterprise markups.In order to have a clear picture of FDI spillover effects and markups of Chinese firms,this article subdivides the spillover effects of FDI based on the spillover channels and sources of foreign investment.It is found that there is a significant negative correlation between the FDI spillover and the markups of local manufacturing enterprises.There is a significant positive correlation between the forward linkage and the enterprise markups.The foreign capital from Hong Kong,Maucao and other countries have a negative horizontal spillover effect on the enterprise markups.However,The negative effect of horizontal spillovers from Hong Kong,Maucao is greater than the horizontal spillover effect of foreign capitals from other countries.Based on the above analysis,we can evaluate the impact of foreign investment on the market monopoly of manufacturing enterprises in China and come to the conclusion that when considering the introduction of foreign investment policies,we should not only consider its impact on the productivity of Chinese manufacturing enterprises,but also consider its Impact on market structure and competition.