Crowding-in Effect & Crowding-out Effect From Foreign Direct Investment To Domestic Investment In China's Iron And Steel Industry

With the development of economic globalization, foreign direct investment has become an important means for transnational companies to enter into the global market. From 1970s to now, foreign direct investment of the whole world has made a big progress. In 2007, the data reached 1979 billion, which was the highest level in history. But with the development of foreign direct investment, the governments of the host country pay more and more attention to the FDI's effects to the domestic economy security. In recent years, the domestic and foreign scholars began to do some research about the effects of foreign direct investment on the industrial safety and they made some achievements on it. But none of scholars do some research on a specific sector's industrial safety from the view of Crowding-in Effect & crowding-out Effect. From this angel, this article does positive analysis on iron and steel industry's Crowding-in Effect & crowding-out Effect from foreign direct investment to domestic investment by using a software tool Eviews 5.1.First, this article represents the existing research results and views from different angels, such as the definition of industrial safety, the reasons of industrial safety's appearance, the effects from foreign direct investment to domestic investment and so on. It also summarizes the theories about industrial safety. Then this article carries out a whole description of the status of our country's foreign direct investment, from the angel of investment amount, investment structure, distributed region, origin structure and so on. In the mean while, this article mainly introduces the developing history of china's steel industry, the problem in the process of development, the definition of the steel industry, the status of steel industry in economic development, the situation of foreign direct investment in our iron and steel industry. Then by using the means of positive analysis, this article builds an equation model about the relationship between foreign direct investment and domestic investment in our iron and steel industry, using the equation model to do ADF tests and cointegration tests according to the historical data of foreign direct investment in iron and steel industry and we get the outcome of OLS. The outcome tells us that there is Crowding-in Effect from foreign direct investment to domestic investment. Finally, combined with the real situation of steel industry, this article analysis the reasons of above outcome and made a conclusion that our country's iron and steel industry is safe now. But in order to keep our iron and steel industry's continuous development, our iron and steel industry need to strive to improve enterprise competitiveness, optimizing the source of foreign capital and strengthen technology spillover effects of foreign direct investment.