How FDI Affect The Technical Efficiency Of Domestic Enterprises

Since reforming and opening up, as the biggest developing country in the world, China grows most rapidly not only in GDP and also in the foreign direct investment (FDI). With more and more FDI flowing into China, the foreigner investing companies have been playing a more and more important role in Chinese economy, such as accelerating Chinese economy growing, improving the industry upgrading, reducing unemployment and so on.. So economists usually consider it as an important variable to explain why the Chinese economy grows so fast.Technical efficiency (TE) is one of two indispensable part of the total factor productivity (TFP). It could measure all the input factors' synthesis efficiency and reflect one industry or region's economic quality. To do a in-depth study on TE is very important and realistic to Chinese present economy. But due to the limitation in theory and data, there are very few economists paying enough attention on TE research, the literature concerned are very few and differ from each other.This paper empirically studies the relationship between FDI and technical efficiency in Guangdong province using the panel data of 28 industries over the period 1999-2004. Firstly, we use Malmquist index based on DEA to compute the technical efficiency of 28 industries in 1999-2004. Then the paper regresses FDI gross and TE using panel data model while the influence of nationalization, competitive effect and other domestic factors have been considered. The result reflects that FDI gross is negative to TE growing. Then we mainly divide the FDI effect into the competitive effect and the personnel flowing effect and regress them in the same method to former. The results demonstrate that competitive effect accelerates TE growing and personnel flowing effect are negative to it. Finally, the paper also analyzes two effect of FDI in capital-intensive industry and labor concentrated industry respectively. We find that competitive effect is more significant in labor concentrated industry than in capital -intensive industry and so is the negative influence of labor flowing effect. In all three regressions, the nationalization is most significant positive to TE growing, and competitive effect and productivity act positively under some conditions.Based on regress result, we propose that the government should build a fair competitive marketing mechanism referred to foreign investment, strength all kinds of human capital inspiriting measures, do justice to foreign enterprise and domestic company and stick to the national enterprises reforming policy.