Study On The Effect Of Industrial Upgrading Of China’s Foreign Direct Investment

Foreign direct investment and industrial upgrading is an important driving force for sustainable economic development, and the objective needs of a country or region deeply involved in the international division of labor and competition. Since the reform and opening up, domestic industry over the same period also showed an escalating trend with the rapid growth of China’s outward foreign direct investment, whether it contains inherent association in this seemingly different economic phenomena, Whether does the China’s OFDI support the domestic industry upgrading in the past few decades? This far-reaching significance for China’s economy needs to transition from traditional development model to a new model of development. In the current, the international financial crisis triggered a global resource elements and industrial relocation, and international competition has undergone profound changes, this gives our companies to create a new strategic opportunities by "’going out" to carry out foreign direct investment, China can promote domestic industrial upgrading by OFDI like the United States, Japan and other countries? Therefore, it has important theoretical and practical significance to study the issue of China’s OFDI, especially the problem of industrial upgrading effect of foreign direct investment.This paper finds that there is a strong correlation between the two by combing through foreign direct investment and industrial upgrading theory; It analysis the experience with the developed countries to promote foreign direct investment in industrial upgrading the home country; It explores the mechanism of foreign direct investment on the home country’s industrial upgrading from the micro motivation, industry linkage and macro variables conduction perspective which combined with case studies; It investigates the effects of foreign direct investment on domestic industrial upgrading from the micro and macro perspectives On the basis which reviewed and analyzed of China’s OFDI and industrial upgrading process, which investigates the impact of China’s OFDI on domestic industrial upgrading. This paper summarized as follows the main conclusions:First, United States, Japan and other countries promoted industrial upgrading the home country by OFDI. Motivation evolution in these countries at different times OFDI generally follows from accessing resources, expanding the market, seeking efficiency to obtaining strategic assets. By measure of industrial upgrading portray discovery, resource-oriented OFDI accelerates heavy industry process home country; market-oriented manufacturing OFDI brings high degree processing of the manufacturing; efficiency-oriented OFDI improves three industrial labor productivity; strategic asset-oriented OFDI promotes the development of manufacturing high-tech. VAR model analysis shows the both long-term equilibrium relationship and causality between foreign direct investment and industrial upgrading indicators.Second, this paper builds the effect mechanism of the home country of foreign direct investment in industrial upgrading by combining the above law and case analysis:one motivation microscopic perspective, refined heavy industrialization effect of resource-oriented OFDI, high degree of processing effect of market-oriented OFDI, productivity effects of efficiency-oriented OFDI and effects of high technology-oriented OFDI of strategic assets; Second, industry linkage perspective, Summarized the marginal effect of industrial transfer, new industries contributed effect, industrial relations and industry competition and the demonstration effect; Third, the perspective of macro variables conduction, sums up the complex mechanism of the effect of industrial upgrading for trade structure as an example. On this basis, this paper proposed the impact mechanism of Chinese OFDI affect domestic industrial upgrading.Third, Based on the analysis of different Chinese companies to invest motivation at the micro level, OFDI not only promotes effectively heavy industrialization> high processing technology and high technology of manufacturing industry, but also enhances the labor productivity of the three industries. Through industrial upgrading and empirical characterization metrics finds both long-term equilibrium relationship and causality between OFDI and these indicators. While using gray correlation method estimated the investment industry correlation and industrial upgrading finds the investment in the information transmission distribution & computer and software industry, wholesale and retail trade, mining, construction and manufacturing are more significant positive to affect China’s industrial upgrading.Fourth, Based on panel data model of provinces in China at the macro level finds OFDI has a positive effect of industrial upgrading, but there are differences in the level. In general, the greater the number of OFDI, and positive affect on industrial upgrading more significant; Rhythm and irregularity of OFDI can reverse the regulation on industrial upgrading. The faster tempo, the greater the degree of irregularity will adversely affect OFDI industrial upgrading effect. In contrast, investment of the slow-paced and rules is more conducive to industrial upgrading the home country; Degree of regional economic openness has a positive regulation on investment rhythm and irregularity degree of influence on industrial upgrading. The irregular and rhythm of the OFDI in industrial upgrading has a negative effect in areas of high economic openness to be less than the lower region.Based on the above analysis, this paper argues that international experience based on national conditions, it encourages businesses to expand the scale of OFDI by using a more efficient slow-paced and regular pattern in an increasingly open economy environment, increase the inherent dynamics of industrial upgrading and accelerate the pace of domestic industrial upgrading.