Effect Of OFDI On The Quality Of IFDI In China

With the successful implementation of China's "Reform and Opening" policy for more than three decades,China's IFDI and OFDI have made great progress in terms of both quantity and quality.IFDI,one of the boosters for leading China's economy in the early stages of policy reform,has an important impact on overall economic development of China's economy and society.With the transformation of economic development objectives,China's focus in the introduction of foreign investment has also changed from the "quantity" of IFDI to "quality".At the same time,chasing a larger scale of IFDI but ignoring the quality of IFDI utilization has also brought many disadvantages to China's economy and society.Therefore,considering that China's two-way direct investments have a good momentum of keeping development,it is important to understand how the OFDI scale can promote the quality of IFDI as an intervening factor.Based on the analysis of mechanism of China's OFDI scale affecting the quality of IFDI through the R&D input intensity variable,together with the history and characteristics of IFDI and OFDI development in recent years,we have established a simultaneous equation system determined by both R&D input intensity and IFDI quality.The empirical test was conducted by using two-way investment data between China and 72 countries and regions,from 2003 to 2018.Results found that,overall,the increase in the size of OFDI has a significant positive effect on the quality of China's IFDI.According to the further detailed analysis,for those countries with higher innovation ability,the expansion of OFDI scale has a significant positive effect on stimulating the R&D input strength of the home country,and then promotes the quality of China's IFDI;while for those countries with lower innovation ability,this positive effect of OFDI on R&D is not significant.Therefore,through the formulation of policies,rational use of OFDI brought about by the effects of technological progress,to encourage high-quality IFDI into China,and actively develop two-way foreign direct investment,to achieve China's foreign economy and trade of the benign development of positive significance.