The Impact Of China’s Foreign Direct Investment On Domestic Technological Progress

With the continuous development of economic globalization, foreign direct investmenthas become an important way to global capital flows and plays an important role to theeconomic structure and international competitiveness of the country. Among the many effectsof foreign investment, causing adverse technology spillover and raise the level of domestictechnology is an important part. In the information age, no country can develop newtechnologies and maintain its leading position entirely on its own strength, and directpurchase of technology comes at higher costs without a guarantee to get the latest technology.For developing countries in particular, the high cost of self-developed technology isunbearable. Therefore, access to technology through foreign investment, has become animportant channel.As the world’s largest developing country, China began to actively join the ranks of foreigninvestment in recent years, and is rapidly becoming one of the major foreign investmentcountries of the world. Domestic studies on the technology spillover effect of China’s foreigndirect investment are inconsistent. This brings space and inspiration to this paper. In this paper,theoretical research, empirical analysis and policy are used to focus on China’s foreign directinvestment in the domestic impact of technological progress. The article first analyzes theclassic foreign direct investment theories, then introduces China’s OFDI situation andproblems in three aspects such as investors, investment, and investment results. The articlethen uses empirical analysis using Granger causality test on China’s foreign direct investmentand total factor productivity and draws the conclusion that Chinese investment in developedcountries can promote technological progress, no investment in developing countriescontribute to technological progress, while technological progress does not promote increasedforeign investment. Finally, the author analyzes the conclusions for the proposed strategy ofChina’s foreign investment and measures that can be taken to enhance their internationalcompetitiveness.