An Empirical Study On Foreign Direct Investment Impacting The International Competitiveness Of China's Service Trade

Since the launch of reform and opening, the scale of China's foreign direct investment (FDI) inflow is more and more bigger, but has shown serious unbalanced distribution of industries, mainly in the manufacturing and service sectors share less. At the same time, China's service trade has been in a state of deficit, and international competitiveness is very weak, still there is a downward trend. In order to explore the impact the foreign direct investment on China's service trade , This article first from Michael. Porter's industrial competitive advantage theory gets that , the improvement of service trade competitiveness are influenced by production factors, domestic demand conditions, the development of the secondary and tertiary industry, and service enterprises'development strategies, organizational structure, competitive state, as well as the opportunities and government policies to develop service trade. Foreign direct investment(FDI) as an investment activity ,which organizes global production and uses the comparative advantages of the host country to obtain the competitive advantage, it can influences the factors that impacting the improvement of service trade competitiveness, thereby influences China's service trade competitiveness. Then using the method of Co-integration test and Granger causality test respectively to explore the relationship between FDI and service export, FDI and service import, FDI and the competitiveness of China's service trade(TC index), by the annual data of China's service trade and FDI from 1985 to 2006, empirical studies show that FDI there is no effect on China's service export, but will increase China's import of services and reduce China's service trade competitiveness. This negative impact is mainly due to China's service industry backward and FDI's uneven distribution in secondary and tertiary industries. So, in order to enhance the competitiveness of China's service trade, it is necessary to speed up the development of the service sector, and to make full use of their advantages and actively develop the potential advantages, changing comparative advantage for competitive advantage, at the same time ,wider the service sector's opening to the outside world, and actively guide FDI flows in to services sector, to improve the uneven distribution of its industry.