The Impact Of Foreign Direct Investment On Market Structure Of China's Automobile Industry

With the process of economy globalization, the foreign direct investment (FDI) has been increasing rapidly and taking more and more important role in China's economy since the Reform and Opening-up. Automotive industry is one of china pillar industries in national economy in 2010. It is capital-intensive and technology-intensive industry with high input, high output, the product added value, economies of scale, high employment coefficient and obvious industrial spill-over effects. In recent years, automotive industry grows rapid and it accounts for a large share in the national economy. Because the domestic automobile enterprises is backward and there is the huge consumption potential in the domestic market, most foreign well-known automobile enterprises have invested in our country. Now major domestic automobile enterprises have already cooperate with foreign enterprises. When the automotive industry develop rapidly, it gradually reveals a lot of problems, such as foreign enterprises control China's auto parts industry and so on.In this paper, we use the latest data analyse the foreign direct investment can affect the market structure of China's automotive industry, in order to provide a theoretical basis for the promotion of China's automotive industry's future development and rational use of foreign capital. In the framework of the theory of industrial organization, we select the three key indicators that influence the market structure:market concentration, product differentiation and entry barriers, theoretically analyse the impact of the foreign direct investment on China's automotive industry; Then, because the market concentration is the basicest and the most important factor that determine the market structure, we establish linear regression model on the market concentration and the foreign direct investment.Finally, in the basis of the theoretical analysis and the empirical study, we make such a conclusion:the entry of the foreign direct investment in China's automobile industry has increased the market concentration that showed U-shaped process of change, while improving the degree of product differentiation and entry barriers; The foreign direct investment in China's automobile industry has accelerated the process of rationalization of industrial organization, but also produced some negative effects. Therefore, this paper proposes the following suggestions on the rational use of the foreign direct investment to optimize the market structure of China's auto industry:to create a positive environment for equal competition in the industry; to encourage mergers and reorganizations, bigger and stronger as soon as possible; to enhance their own research and development capabilities, to actively develop their own brands; to speed up China's auto parts industry.