Foreign Direct Investment And Upgrading Of Industrial Structure

At present,China’s economy and society have entered a new normal.The rapid development of China’s economy is driven by Chinese manufacturing,which is accompanied by the increase of production cost and the aggravation of environmental pollution.Under the background of the new normal,how to promote the upgrading of industrial structure to achieve the balanced development among regions is a particularly important issue at present.In recent years,the rapid development of foreign trade has provided a good convenience for international capital flow.The scale of actual utilization of foreign capital in China has increased substantially.While FDI provides funds for China,it also produces capital spillover effect and technology spillover effect,which promotes the optimization and upgrading of China’s industrial structure to achieve high-quality economic development.With the increasing importance of financial market,some scholars try to analyze the influence of FDI on the upgrading of industrial structure under the constraint of financial market.According to the endogenous growth theory,the host country can better absorb the spillover effect of FDI when its own resources are sufficient,so the spillover effect can be greater in countries with developed financial markets for FDI investment.After China’s economy enters the "new normal",the endogenous driving force of economic growth obviously declines.At this time,the optimization and upgrading of industrial structure is undoubtedly the key factor to promote economic growth.Considering the importance of industrial structure upgrading to China’s sustainable economic development,it is crucial tomake full use of the spillover effect of FDI,and the financial market is an important factor to accelerate the role of FDI in industrial structure,so how the impact of FDI on industrial structure upgrading under the constraints of financial market has gradually attracted the attention of scholars.This paper firstly analyzes the mechanism of FDI’s effect on industrial structure upgrading,and then discusses whether there are differences in the influence of FDI on industrial structure upgrading in different financial markets based on regional differences in financial markets.Taking the financial market size,financial market structure and financial market efficiency as threshold variables,the panel threshold model was constructed by using the panel data of 29 provinces in China from 1990 to 2017 to test the impact of FDI on the upgrading of industrial structure.This paper finds that FDI can promote the upgrading of industrial structure in different financial market sizes,and the optimal financial market size is no less than 3.64.After the financial market size crosses this threshold,FDI has the greatest effect on the upgrading of industrial structure.The optimization of financial market structure is conducive to the upgrading of FDI industrial structure,and the optimal financial market structure is no less than 1.50.When the financial market efficiency is lower than the threshold value,FDI plays a greater role in promoting the upgrading of industrial structure.However,if the financial market efficiency is too high,the promotion effect of FDI on the upgrading of industrial structure will be weakened,and the optimal financial market efficiency is no higher than 1.03.The above results are still robust after the distance between provincial capitals and ports is usedas the tool variable and the measurement method to replace the explained variable,indicating that the baseline regression estimation results are robust.It is found that the expansion of financial market scale and the optimization of financial market structure will both improve the spillover effect of FDI and the reliability of the estimated results.Therefore,in order to give full play to the spillover effect of FDI and promote the upgrading of my country’s industrial structure,it is necessary to improve the policies related to the introduction of foreign capital,and to reasonably introduce foreign capital according to the characteristics of the regional financial market threshold.