The Analysis On Technology Transfer Effects Of Foreign Direct Investment In China

With the increasing pace of globalization, trade and investment activities between different countries in the world are getting more and more closely than before. FDI is playing a crucial role in promoting economic boom. It was in the1970s that China initiated the policy of reform and opening. And the core of the policy was exactly investment attraction. When back to1979, the FDI that China attracted was less than$100. However, after about30years, according to UNCTAD, in2012, the global FDI decreased by18%, getting to$1.3trillion because of economic downturn, amount to the same level of2009. Even in this case, the performance of China seemed to be a shining star in the darkness, reaching$111.72billion. Along with the large-scale FDI comes advanced technology, which is necessary to increase the economy.Usually, technology transformation goes hand in hand with FDI. In other words, technology transformation permeates from developed countries to developing countries, which contributes a lot to the host countries’economy boom. With a low technology level, China tries hard to attract foreign direct investment (FDI) in order to draw the advanced technology from investors. The FDI technology transfer effects can show in many aspects. Upgrading industrial structure, expanding exports, creating more job opportunities and improving the quality of human capital are the positive effects. On the other hand, there are negative effects like crowding-out effects on R&D, side-effects on IPR (intellectual property protection), low quality of technology transferred and high cost the monopoly effect on Chinese market.Getting advanced technology by FDI to elevate innovation of host countries is an important issue to developing countries.In addition, as for the host governments and the local companies, apart from attracting advanced technology, what they should think deeply is how to ensure the outcome of technology importation, how to absorb those sophisticated technology and how to re-innovate based on the technology imported.This paper includes five chapters. Chapter one, introduction constitutes the background and significance of the topic, literature review, structure and innovations and deficiencies, among which, literature review retrospect the relevant essays on FDI and technology transformation home and abroad in the past decades. Chapter two, theoretical study includes two main theories, one of which is theory on FDI, and the other is theory on technology transfer. Chapter three, the essay makes a brief review on the FDI in China, analyses the changes in FDI according to regions, industries and investment methods etc., and especially pays attention to the recent new changes in FDI. And then the essay stresses on the positive effects on FDI technology transformation, which generally speaking, includes direct effects and indirect effects. At first, the essay introduces FDI technology transformation system. Then, it moves on to direct effects. Direct effects mean upgrading industry structure, boosting exports, increasing jobs and improving human resources and uplifting the technology advance in host countries. On the other hand, demonstration-the copycat effect, competition effect, relation effect and training effect are four ways to achieve technology spillover effects. However, every coin has its two sides, and this rule applies to FDI technology transformation as well. Apart from the positive effects, there is unpleasant side, too. Chapter four is assigned to discuss this negative side. There are four parts. The first part is crowding-out effect on local R&D; the second part is IPR (intellectual property rights); the third part is low quality and high cost of technology transformation; the fourth part is the monopoly effect on Chinese market. After that, here comes chapter five, which mainly offers some useful and helpful suggestions for China government and local companies. As for government, it matters a great deal to perfect the market system, create a fair competitive environment, orient its own role correctly and induce the acceleration of technology transformation. For another, there are two points the local companies should pay attention to. Firstly, they should not only select the appropriate technology imported, but also try to strengthen their ability to absorb. Secondly, in this world, what can determine whether you win or not in the end is the innovation ability of your own. So the local company can never attach too much importance to this issue. Only when the negative effects are under control, can China take advantage of the positive part and economy develop sustainably and healthily.As for the innovation parts, in the first place, this essay emphasizes the current new features of FDI in China, for example, FDI after China’s entrance in WTO and FDI in economic crisis. Secondly, based on the summary of the research on FDI technology home and abroad for decades, and considering the practical situation of China, the essay analyses technology transformation effects of FDI deeply. Thirdly, to make the essay vivid, on the basis of theories, the essay introduces a large number of cases, which increases the persuasiveness and readability. Fourthly, the issue on FDI technology transfer has drawn much attention in the academic world, however, in most cases, people attach too much emphasize on the positive effects on the host countries, thus the adverse side has not been sufficiently studied, and this is where the essay tries to compensate.As for the shortcomings, due to the unavailability of data, some charts and tables are unable to be equipped with the latest data, leading to a unsatisfactory result, which is unexpected.