Research On The Impact Of The Establishment Of China’s Pilot Free Trade Zone On The Inflow Of Foreign Direct Investment

In the process of deepening economic globalization,China has implemented the strategic measures of building pilot free trade zones to achieve the goal of comprehensively deepening reform and expanding opening-up.Since the establishment of China(Shanghai)Pilot Free Trade Zone in 2013,its institutional advantages have become the main factor to attract foreign capital,and it has made remarkable achievements in promoting foreign direct investment,which undoubtedly reflects the importance of the Chinese government to the level of foreign attraction in the pilot Free trade zone.In view of this,this paper mainly disscusses the following two issues: first,does the establishment of pilot free trade zones promote the inflow of foreign direct investment? Second,how does the establishment of pilot free trade zones affect the inflow of foreign direct investment? First of all,This paper carefully combs the previous literature on the relationship between the construction of the pilot free trade zone and the inflow of foreign direct investment,summarizes the reform measures of China’s pilot free trade zones and the inflow of foreign direct investment in regions,and expounds the impact of the implementation of free trade zone policies on the inflow of foreign direct investment in cities at the level of theoretical mechanism;Secondly,based on the panel data of 263 prefecture-level cities(municipalities directly under the central government)from 2006 to 2019,the multi-stage DID regression method is used for empirical research.Finally,on the basis of empirical analysis,the following propositions are drawn:(1)The establishment of pilot free trade zones has greatly encouraged FDI flows,and the reliability of the result is proved by the parallel trend test and robustness test;(2)Compared with other regions,the establishment of pilot free trade zones in the eastern coastal area will bring more obvious effect of attracting foreign investment,and the promotion effect of the coastal pilot free trade zones on the inflow of foreign direct investment is more obvious;(3)The establishment of pilot free trade zones mainly affects the inflow of foreign direct investment by reducing access restrictions and improving the level of innovation;(4)The establishment of pilot free trade zones has neither obvious “Radiation Effect” nor obvious “Siphon Effect” on the inflow of foreign capital to neighboring cities;The construction of the "the Belt and Road" can promote the inflow of foreign direct investment in the cities where the pilot free trade zone is located to achieve greater growth,and plays the linkage role of the two strategies.In response to above conclusions,this paper offers the following policy suggestions:(1)Deepen the differentiated exploration of attracting foreign investment in different pilot free trade zones;(2)Give full play to the role of such dynamic mechanisms as reducing access restrictions and improving the level of innovation in the construction of the pilot free trade zones in promoting the inflow of foreign direct investment;(3)Strengthen the awareness that the pilot free trade zones serves major national strategies;(4)Benchmark international advanced free trade practices and investment rules;(5)Establish institutionalized fault-tolerant mechanism.