Impact Of Outward Foreign Direct Investment On Total Factor Productivity In China

In recent years, as economic globalization deepening, China graduallyconverts from absorbing foreign investment mostly to the stage of absorbingforeign investment and outward investment at the same time. At present, manyscholars discuss the impact of inward foreign direct investment (IFDI) on homecountry’s economic, but researches on the impact of developing countriesoutward foreign direct investment (OFDI) are little. Therefore, this paper teststhe case of China, which does the research about the impact of OFDI on totalfactor productivity.The paper firstly elaborated the theory evolution of developed anddeveloping country OFDI, summarized motives of developing countries OFDI,explored total factor productivity(TFP) theory and measure methods, andanalyzed Chinese OFDI and the source of TFP growth preliminarily. The papermade a reference to foreign classical model and the actual situation of China, andset OFDI as the main explanatory variables, IFDI, imports and exports trade, thepublic finance expenditure and human capital with high education as otherexplanatory variables, TFP and its separated indicators as dependent variables inorder to build a panel data model. Furthermore, TFP of29regions from the year2003to2010was calculated by the Malmquist index based on DEA method, thenanalyzed by descriptive statistics. The paper used the static panel data model forempirical analysis. Meanwhile, it empirically found that:(1) OFDI stockaccounting for the proportion of GDP increased by1%, technical progress levelwill rise0.0361%, pure technical efficiency will decline0.0218%, and scaleefficiency will decline0.0136%. The results of three regions are similar to thecountry data’s;(2) The influence of high education human capital on TFP changeand technical progress is positive and significant;(3) The influences of importand export trade ratio in the eastern, central and western region on their technicalprogress are significantly positive, not significant and significantly negative; Thecorrelation between the western region finance and government expenditureproportion and TFP growth is significant and positive. The conclusions can helpgovernment to make investment promotion and government financial investmentin science and technology policy.