Study On The Impact Of Foreign Direct Investment On Our Economy

We use the foreign capital utilization more and more in large scale with the constant deepening of opening and reform. China's total import and export volume in 2007 reached 2.17373 trillion U.S. dollars, of which exports reached 1217.781 billion U.S. dollars, imports reached 955.15 billion U.S. dollars. More than 20 years of China's opening and reform, China's investment performance is very significantly. We have recommended foreign direct investment more than 400 billion U.S. dollars at the end of 2006, and we become the most use of foreign capital in developing countries for consecutive 9 years. In China, however, the actual use of foreign capital was 4366 million U.S. dollars in 1991, and it reached to 78.339 billion U.S. dollars in 2007, its increase is up to 16 times. In particular foreign direct investment is significantly higher than that of other foreign investment. In fact, the foreign investment in our country have had a profound impact in all aspects of the economy, especially the impact on upgrading industrial structure and employment are particularly important.This article is based on Cobb—Douglas production function model, and Analyse the promotion of FDI in three industries to the three industries. Through the empirical analysis, the contribution of foreign direct investment on China's economy is vey significant. FDI into the primary industry contribute 0.421122% to GDP of the primary industry, FDI into the second industry contribute 0.526027% to GDP of the second industry, FDI into the tertiary industry contribute 0.421122% to GDP of the tertiary industry. The empirical analysis result shows when the first, second and tertiary industries'FDI increased by 1%, which can stimulate the first, second and tertiary industries'employment in the corresponding increase by 0.011%, 0.079%, 0.159%. In the Granger causality test, the first and tertiary industries'FDI and employment exists a one-way Granger relationship; and the secondary industry's FDI and employment exists bilateral Granger relationship. The empirical results show that the tertiary industry's absorptive capacity of employment is higher than the first and second industries, while the secondary industry's absorptive capacity is higher than the first one. It can demonstrate that speeding up the upgrading of the industrial structure is positive to employment, especially the tertiary industry should be sped up in order to solve the problem of employment. Because FDI tilt in eastern,central and western regions has led to the differences of employment in the three regions, the influence FDI has on employment in eastern,central and western China ranging from 1986 to 2006 is empirically analyzed by using econometrics. Empirical analysis shows that the economic development promote the employment of the three regions, regarding to promoting effect the eastern is the largest and the central is second, the western is the smallest. FDI is capital-concentrated in eastern region, and capital expels labor, which has negative effect on employment; while the high-educated has positive effect. As far as central and western regions, FDI is labor-concentrated, thus the influence is positive, but the high-educated fled has little contribution to employment in the two regions. Because of the different absorptive capacity of employment in eastern, central and western regions, different types of enterprises should adopt different means to resolve the employment problems of the labor force. Analysing the game between enterprise and labor, we can conclude that: in labor-intensive enterprises, the enterprises are more likely to hire low-quality labor, and human capital investment is also directed against the low quality of the overall labor force training; while in the capital (or technology)-intensive enterprises, the enterprises pay more attention to professionals and high-quality labor force, which can create high profits, business investment in human capital is based on high-quality labor force. The more the cost of high-quality labor force, the more reward enterprise gets. The enterprise should give the workers promotion after the professional training in order to retain the talent and enhance the competitiveness. According to the above analysis, the author put forward some policy recommendations.