China Manufacturing Inter-industry Spillover Effects Of Fdi Within The Industry

Modern technological revolution, particularly the information technology revolution, has greatly promoted the economic globalization and scientific and technological globalization. Foreign Direct Investment (FDI), as the major carriers of the capital, technical factors, is not only the transfer of capital, but also the transfer of advanced technology and management experience. This is a great help to developing countries for reducing technological gap and developing economic.This article focuses on two issues of the spillover effect of FDI: (1) whether there is spillover effect in manufacturing sectors of China; (2) how the factors of industrial structure, Market mechanism and technological regime affect the spillover effect, intra-industry and inter-industry. We used the advanced model to calculate spillover effect of inter-industry, and integrate of the input-output model. Selected the data of 28 manufacturing sectors form 1999 to 2003 of China, and chose EVIEWS tools for panel data statistical analysis.The research shows that the intra-industry spillover effect in China's manufacturing industry is not notable. But we can find the inter-industry spillover. The industries up streamed get great forward spillover, while the industries down streamed get backward spillover. Intense marketing competition and maturity of the market environment are good for inter-industry spillover, but intra-industry spillover is bigger in relaxative marketing competition. As technological regime factors, technological opportunity is irrelevance with intra-industry spillover, but we find some intra-industry spillover in industries which have more appropriability of technological. The effect of technological regime to inter-industry spillover is quite different. Higher technological opportunity and technological appropriability are good for forward spillover but not good for backward spillover. After that we studied a typical case in China's injection molding machine industries, to illustrate how enterprises can achieve competitive advantage in co-operation with FDI.Based on the results we give three suggestions to our FDI policy. (1) Give different treatments to FDI in different industries, limit the market share of FDI in intense competition industries; (2) focus on inter-industry spillover, reduce the tax preferential for processing trade; (3) Increase the protection of intellectual property rights, encourage innovation and slowdown the trend of sole venture in joint venture.