The Study On Incentive Policy And Competition Model Of Local Government For FDI

The pace of globalization and China's reform is quickening up and China's economy is integrating into the world economy. Under this circumstance, the flow-in of foreign capitals, primarily in the form of FDI, is fast growing, and its role in China's macro economy is becoming more and more important. But at the same time there happened many clash in this course. This to some extent owns to China's policy of attracting FDI. In fact, the policy is operating by government so it can't keep up with the pace of development of China's reform. In this paper, we state the insufficiency of our current policy. After that, this paper further explored into the pros and cons of FDI to China's economy growth, and offered some advice for China on how to attract and better use FDI in the future.This article is composed of five chapters:Chapter one discusses the theory concerning FDI and the FDI policy framework. For example, Dunning's Eclectic Theory analyzes the decisive factors which decide the FDI occurs or not. It accounts for the conditions FDI occurs and obviously indicates that the host country's FDI policy will play an important role in attracting FDI firstly. Just on the theories above, the policy framework is set up to attract FDI. There are two kinds of policies: one is incentive policy the other is regulation policy. Chapter two and Chapter three give a comprehensive analysis on the China's FDI attracting policy. At first, they introduce the main contents and the characteristics of the FDI attracting policy, then analyze the incentive policy of attracting FDI in china and how the policy influence the FDI scale, original structure, regional and industrial structure.Chapter four mainly use Cournot model to analysis the result on the region that China's FDI attracting policy, and to modify the Fumagalli's incentive competition model. And we discuss the effect to welfare both region that attract FDI. We find that FDI is not necessary for adding welfare for region. Through improve the location of FDI , that will not result in loss in welfare of both regionBased on the analysis above, Chapter five gets some major enlightens on how to improve China's attracting policy.