Does The Rising Proportion Of Service FDI Improve China’s Economic Growth Efficiency?

With the deepening of the division of labor system,services have occupied a dominant place in most economies,and the global economy shows a new trend from "industrial economy" to "service economy".In order to gain competition advantages,enterprises began to shift the industrial chain from manufacturing-centered to servicecentered,and improve production efficiency through service mode innovation.Although service industry has been developing at a relatively slow pace in China for a long time,its role in the current economic transformation and upgrading has become increasingly prominent as China has been a new normal situation.It is an important policy goal for China to attract FDI to the service industry to improve the development level of the service industry and improve the economic growth efficiency.Since China’s accession to the WTO,the proportion of service FDI has been rising,from 26% in 2000 to 69% in 2019.It is of great significance to study the impact of the rising proportion of FDI in service industry on China’s economic growth efficiency.Based on the existing literature and relevant economic theories,this paper elaborates the mechanism of the rising proportion of service FDI effects on TFP.Based on the panel data of 26 provinces in China from 2000 to 2019,this paper examined the effect of the rising proportion of service FDI on China’s total factor productivity using a double fixed effect model and the threshold effect of human capital on total factor productivity.The basic conclusions of this paper are as follows:(1)The increasing proportion of service FDI has an ‘u-shaped’ impact on total factor productivity,the main driving force of total factor productivity coming from technological progress.(2)The rising proportion of producer services FDI not only can improve total factor productivity by promoting technical progress,and also by improving technology efficiency,on the contrast,the rising proportion of life service FDI drains resources and hurts factor productivity.(3)Human capital has a significant dual-threshold effect,the positive impact of increasing proportion of service FDI on total factor productivity is significantly enhanced as the improvement of human capital level.(4)The rising proportion of service FDI in eastern China has a greater effect on the improvement of total factor productivity than that in central and western China.Finally,this paper puts forward several policy recommendations for improving the total factor productivity in China: expanding opening-up of the service industry,focusing on the regional coordinated development,promoting the upgrading of the internal structure of service industry,and increasing the proportion of investment in knowledge-informationtechnology intensive production service industry.