Foreign Direct Investment To Upgrade China's Industrial Agglomeration And Industrial Relations

Over 20 years' opening up brings an economic boom to our country, and foreign investment has played an important role. So much is happening in coastal area that it is bound up with the foreign investment. Foreign investment, especially from multinational company, can regulate the industry structure, therefore many local governments prefer multinational companies and make various local policies to attract foreign investments. However, each local government does things in his own way, they think that local government is largely responsible for the formation of the industry cluster. So they built many airports and ports, redundant projects appear, redundant projects in different places cause great wasting of resources.The paper aimed at the government misunderstanding, followed the basis of the existing theory in Economic Growth Theory, used the international direct investment location choice theory and some other researches on MNC's investment and industry, deeply analysed the relations among the foreign direct investment Industry Cluster and Industry Upgrade, and the paper also studied the mechanism of Industry Cluster formation, found out the relations among them, put forward some suggestions after analyzing the problem.This thesis comes to conclusions that government is not the decisive role in process of industry cluster formation, and the market economy played the essential role in this process. But the interactional relations among the Industry Clusters, foreign direct investment, Industry Upgrade are the inherent mechanism of the market economy. The misunderstanding of government is that the government have not found the right role in the formation of Industry Cluster. Generally speaking, the government should render services for development of Industry Cluster, pay more attention to the law of Industry cluster development, create a favorable external circumstance for the development of the Industry Cluster.