The Effect Analysis Of FDI’s Influence On Market Structure In Chinese Motor Industry

With the rapid development of China’s car production and technology, the auto industry has been driving the development of social economy in China. After 2002, China’s auto industry has entered the phase of explosive growth, and gradually realized from weak to strong stride. As a major part of the world auto industry, China has become an attractive place for foreign investment because of the advantage of resources and manpower. Recently, the multinational companies input much more investment scale in automobile industry of China. Some multinational companies take more control in Chinese market, which causes us some concern that MNCs now master the core technology of auto industry and the advanced management experience. If our own companies cannot gain the technology spillover effects, the power of MNCs will be a great threat in the market share and structure.Whether foreign direct investment in China’s automobile industry leads to market monopoly and affects the market structure or not, the existing research doesn’t have a clear conclusion. This article will use effect analysis and empirical analysis system to explore the impact of FDI on market structure of auto industry, and then analyze its advantages and disadvantages, which is the basis to put forward policy suggestions to promote the development of auto industry. The basic content is as follows: First, this paper will summarize the theory and literature of the FDI influence on the market structure of host country, and also apply Stan Kerr’s equilibrium model to explain leading manufacturer and following manufacturer’s production competition relations. It can help to explore the relationship of FDI and the market structure and get other factors of market structure of host country. Secondly, this paper will expound the overall situation of FDI in China’s automobile industry, including the process, methods and characteristics of FDI, the enterprise behavior and so on. It provides a clue to study the effect of FDI on the market structure. Thirdly, this paper will use two methods to elaborate this research topic:Demonstration Research and Qualitative Analysis. For Demonstration Research, the market structure effect will be described from three aspects:Concentration degree, entry barrier as well as economics of scale.From each aspects, the influence of MNC’s direct investment to the market structure effect of motor industry will be demonstrated. For Qualitative Analysis,this paper will choose the most important and representative index of market structure ’Concentration degree’ to carry the quantitative analysis.This paper also consider other factors to influence Concentration degree of auto industry, mainly including total imports and total employment of auto industry. And then it will use polynomial OLS regression and systemic MLE estimates,which analyze the relations between FDI and auto’s market structure.At last, we will conclude what we get from the research and propose the corresponding policy advice to the government for reference.