Research Of The Influence Of FDI On The China’s Industry Income Distribution

Since reform and opening up, the market economy has developed rapidly in China, and the standard of living has improved greatly. In2012, average income of employed person in cities and towns is60times of1978’s, but the industry income gap kept high in these years: the specific value of lowest average wage and highest average wage was1:2.17in1978, it expanded to1:4.48in2012.At the same time, China realized cross-cutting development. In2012, China’s FDI inflows reached to$111.7billion, becoming the country who continuously using the maximum FDI in developing countries for19years, ranks only second to United States in the world. From1978to2011, the amount of FDI grows Rapidly, not only brings large amount of capital but also brings advanced technology and idears.As the amount of FDI increasing, and the scope of investment widening, the investment proportion of FDI in each industry in our country has improved greatly, this has made a profound impact on industry income distribution.The coexistence of rapidly inflowing FDI, rapidly increasing residents’ income and widening income gap among industries has attracted extensive attention around the world. This paper carried on a theoretical research according to whether FDI raised the average income level of the whole industry and whether FDI influence the income gap among industries. Then we expound the mechanism of how FDI affects our country’s industry income level, analyze the distribution pattern, existing problems of our country’s FDI. Afterwards we get a regression analysis by using solid effective model according to panel data during2004-2011. The empirical results show that FDI improved average industry’s income level of our country, and has a significant impact on seven industries. Of which, for culture sports and entertainment it has a significant negative impact, for six industries including computer services and software industry it has a significant positive impact, for11industries such as construction, finance it has no significant effect. At the same time, due to the positive effect, negative effect and no effect on different industries’ income, the income gap among industries expanded. Finally, we propose optimized FDI policies and recommendations which can optimize China’s industry income distribution through theoretical and empirical analysis. We should raise the amount of FDI in which FDI has a positive effect on the industry at the same time the FDI participation rate was on a low level; For industries which have much FDI quantity and the industry’s income level is not significantly affected by the FDI, we should focus more on the quality of FDI; For industries whose average income level is influenced negatively by the FDI, we should attach important to both quantity and quality of FDI; For the policy of introducing FDI, we should change the traditional ways from relying on preferential policies to optimizing the investment environment of the domestic market.