Fdi Spillover Effect Analysis Of Zhejiang Private Manufacturing

Zhejiang province, locating in the Yangtze River delta, is famous for its active development of private economy. As for it, taking Zhejiang province as the example is a good way for studying the effect of FDI on private companies. Does it Crowd in Domestic Investment? And to what extent, FDI influences local companies. Does domestic companies benefit from FDI, and what the factors affecting the performance. Obviously, these issues are directly related to government’s policy making both theoretically and practically. This paper attempts to come up with policies for better utilizing foreign investment, in order to push forward the development of Zhejiang economy, through application of a series of models.Based on the utilizing the model of Agosin&Mayer, as well as the relevant data during the year from 2005 to 2009, an empirical study is taken to calculate the effect of FDI in Zhejiang province, especially classifying the regions as the whole region northeastern region,and southwestern region.The results shows that FDI crowds in domestic investment as a whole region of Zhejiang province,and it exists significant effect of crowing in on northeastern region’s companies, is opposite to what is happening in the southwestern region.Drawing on Feder two-sector model, with the industry panel data in the year of 2003-2007, the paper is also empirically analyzing FDI spillover effects in manufacturing sector,the results confirms the existence of a province-wide positive spillover effects of foreign investment. The study also shows that the smaller technologically gap between domestic and foreign companies, more capital-intensive of domestic companies as well as more severe competition in industry, relate to higher spillover effect of FDI on domestic companies.