Research On Effect Of FDI On Chinese Market Concentration Degree

In recent years, foreign direct investment (FDI) which followed into China’s automotive industry has increased dramatically and plays an important role to the development of China’s automobile industry and the economy as a whole. At the same time the automotive industry is characterized by long industrial chain and high degree of association, is an important industry of the national economy, FDI has brought the benefits to the development of China’s automobile industry,but industry safety occurs, and then the whole country’s industrial security will be adversely affected. In this paper, from the perspective of China’s automotive industry, combined with the automotive industry status quo of China’s FDI, on the basis of theoretical analysis, the impact of foreign direct investment in the market concentration of China’s automobile industry has been studied by using of vector auto regression(VAR) and other empirical methods, providing a theoretical basis for using FDI more efficiently and safely.Firstly, FDI and market concentration theories are analyzed theoretically, then analyze the current situation of FDI in the automotive industry in our country by statistical methods, then using of the vector auto regression econometric models and Granger causality, testing that how China’s FDI in the automotive industry affect the market concentration China’s auto industry by making use of data from 1990 to 2013.The empirical result shows:the relationship between FDI and market concentration is bidirectional if at the 10% significance level, that means that FDI leads to ascension of market concentration, and ascension of market concentration further leads rise of FDI, thus forming an interactive cycle of mutually reinforcement; it is concluded that the relationship between the two is one-way if at the 5% significance level, that means FDI leads to rise of market concentration, but rise of market concentration does not lead to an increase of FDI. In short, there is a clear positive correlation between FDI and market concentration of China’s automobile industry, FDI leads to the increase of market concentration in China’s auto industry, and poses some risk for China’s industrial safety and national security.Finally, based on analysis of the empirical measurement, I draw that:We will continue to introduce FDI in context of the "new normal economy", at the same time, we should understand pros and cons of FDI comprehensively, and introduce FDI more rationally, and try our best to improve the core competitiveness of our own brand, thus making greater contribution to China’s economic development. Therefore, this essay proposes relevant practical suggestions from the perspective of the Chinese government, the auto companies macro and micro economic entities to. foreign direct investment result of China’s automobile industry to improve the problem of market concentration as well as other sectors of a similar situation,...