Foreign Direct Investment In The International Competitiveness Of China's Automobile Industry

Based on Michael Porter's "diamond" theory, this paper tried to analyze the mechanism and channels of FDI's influences on the sources of industry competitiveness-the four key elements and the two exterior factors of the "diamond", to make quantitative research on the effects and to bring forward some suggestions about how to improve international competitiveness of Chinese auto industry by taking use of FDI.As for domestic requirements, FDI not only promotes the market growth, it also cultivates expert and captious customers; the effects of FDI on production elements include that FDI accelerates the capital accumulation, promotes the HR exploitation and technology advancement; the pulling-up effects on the supporting industries and the diffusion effects on the related industries are the two main influences of FDI on the related and supporting industries; In the fields of firm strategy and market competition, FDI provides demonstration for Chinese State-owned firms to make a reform and enhances the domestic competition; the MNEs' capabilities of understanding and grasping chances are also demonstrations for local firms; finally, FDI impacts the government through enhancing the interaction between government and the four key elements.In the part of quantitative analysis, the paper estimated the influences of FDI on the international competitiveness of the whole industry and on domestic firms. The results showed that FDI effected the general TFP of Chinese auto industry positively, while the local auto firms in China had not absorbed the spillover effects of foreign firms and were hindered by MNEs in developing. According to the theory and quantitative analysis results, the paper made suggestions from both points of domestic enterprises and Chinese government. The firms should consolidate and enlarge channels of absorbing spillover-effects of foreign firms, intensify the policy of making a reform the state-owned firms, and cultivate the capability of research independently. Meanwhile, thegovernment should implement the active policy of attracting foreign capitals oriented by advanced technologies, promote the spillover-effects and reduce the push-out effects of foreign firms, and at the same time maintain a fair competition environment, prevent monopolization of foreign firms, protect national industries properly and develop national brands.