Analysis On China's FDI Technology Spillover Effect And Absorptive Capability

Since carrying out the reform and opening up policy, especially since 1992, China has attracted more and more foreign direct investment(FDI). At the very beginning, China actively introduced FDI to make up the lack of domestic funds, while later the puepose was gradually shifted to implement the "market for technology" strategy.It is generally acknowledged that FDI technology spillover effect(TSE) could promote the host country's technological progress. However, the level of human capital, research and development(R&D) capacity, policies and the development of the financial system in the host country all affect the size of FDI TSE. This combination of factors is known as the host country's absorptive capability on FDI TSE, in which the level of human capital and R&D capacaity occupy a key position.How are China's FDI TSE and absorptive capability on earth? Two aspects,including theoretical and empirical analysis,are taken into research in this paper. It is divided into five parts.The first part is the introduction which introduces the research background, the status quo of domenstic and foreign researches, research methods and research purposes. The second part gives a comprehensive description to the constituent elements and influence factors of FDI TSE and absorptive capability and the threshold effect. The third part expounds the relevant theories of absorptive capability from the perspectives of human capital and domestic R&D, which provides a theoretical basis for the empirical research. The fourth part is the empirical study, building economic models based on the real situation of our country, including making use of Solow Residual Value to estimate China's technological progress rate and through the model test results obtaining that since 1992 China's technological progress relies mainly on human capital's self-accumulation effcet and low-end FDI TSE while the domestic R&D is still a weak part in China and the "technology lock-in" strategy used by foreign-funded enterprises also to a large extent hindered the absorption. The fifth part is to put forward policy recommendations on China's FDI, human capital and R&D strategy according to the empirical results.In the future when we make use of FDI, we must shift our attention from concerning about quantitative growth to qualitative improvement, and at the same time, we must focus on enhancing the absorptive capability of human capital and domestic R&D. Only in this way China could ensure a great stride in technology and a long-term economic growth.