The Analysis Of How Foreign Direct Investment Affect Industrial Agglomeration Of Sichuan Province

Since the reform and opening up, The manufacturing of China’s eastern coastal provinces gradually emerge a obvious agglomeration trend what play a huge role to improve the local investment environment, improve the regional innovation capacity and to promote local business growth.With the depth of the western development, the western provinces and cities began to undertake the transfer of industries from the eastern coastal areas.In order to improve investment efficiency and to improve the competitiveness of regional industries, local governments have introduced policies to vigorously attract foreign direct investment and hope it will accelerate the speed of industrial agglomeration. It has obtained agreement by most economists that foreign direct investment can effectively promote industrial agglomeration in the level of the country and the eastern provinces, however, the paper focuses on the problem whether this conclusion applies equally to the central and western provinces particularly in Sichuan is. In addition, this article concerns the problem which type of industry agglomeration has promoted most through foreign direct investment. It also has significance for the central and western provinces particularly Sichuan to select and make use of foreign direct investment, in order to more effectively promote the formation of industrial agglomeration.First, on the basis of comprehensively reviewing the existing research results, the influence mechanism on industrial agglomeration by foreign direct investment is divided into two categories:indirectly promotion and directly promotion. Indirect promotion mechanism mainly refers to the mechanism that according to the high demands on the investment environment, the foreign-funded enterprises promote and guide the Government to further improve the investment environment in order to attract more foreign enterprises to invest and gradually formed the mechanism of industrial agglomeration. On the other way, the direct promotion mechanism refers to the mechanism that the foreign direct investment accelerate the emergence and development of industrial agglomeration through the industry chain cluster mechanism, demonstration gathering mechanisms and competitive agglomeration mechanism. On this basis, the paper takes Intel for example to detailedly analyse its influence mechanism on electronic information industry agglomeration in Sichuan.Secondly, the paper detailedly analyse the statu and development trend characteristics of industrial agglomeration in Sichuan Province.Although the absolute degree of Sichuan industrial agglomeration is still low, some dominant industries has created obvious effects in the Midwest. On the aspect of the variation trend of industrial agglomeration, we find that most of the low concentration level industries in Sichuan Province tend to be more dispersed, however, the moderate and high agglomeration industries continue to gather, which also confirms the self-reinforcing effects of industrial agglomeration.Finally, we find that the foreign direct investment is indeed abled to promote the manufacturing sector in Sichuan Province through empirical testing. Inside, foreign direct investment in Sichuan Province affect the capital-intensive industries most. The second is the capital&technical-intensive industries. But the effect on the labor-intensive industries is not obvious. In addition, we also find that foreign direct investment affect the larger radius Industry Chain of the manufacturing sector is much more obvious than the shorter radius Industry Chain of the manufacturing sector.According to the above conclusion, this article put forward the following policy recommendations on how to take better use of foreign direct investment and promote industrial agglomeration:First, the Government should raise the awareness of active service, enhance the public service system, and give full play to the model combined effect of foreign direct investment and investment environmental improvement. Second, to create a favorable investment environment and develop a professional investment team, as much as possible to create "historical accident", like Intel, to promote the formation of new industrial agglomeration. Third, we should give priority to capital or technology-intensive and long-radius of the manufacturing foreign-funded enterprises in order to give full play to the industrial chain of the combined effect of such foreign-funded enterprises and improve the level of industrial agglomeration ultimately.