A Study On The Relationship Between China 's Foreign Direct Investment And Industrial Structure Adjustment

After the international financial crisis, the world economy hasentered into a period of slow growth and many countries have carriedout reforms. Over last thirty years, China’s outward direct investmenthas been increasing at a high speed in the last decade. Is it what hasenhanced the development of domestic industrial structure adjustment?What China’s economy is still complicated in the context ofdeepening the reform of today. There is a long way to go to achievethe strategic adjustment of industrial structure. Whether the outwarddirect investment can be or how to become an important drivingfactor to the industrial structure adjustment is very worth studying.This paper analyzes the development trend of China’s outwarddirect investment, which in terms of absolute scale, is constantlyexpanding,yet the relative scale is still small. In terms of structure,China’s outward direct investment in the industry is very extensive,while it relatively concentrates in areas such as the leasing andbusiness service industry, mining industry, wholesale and retailindustry and the financial sector. Its regional distribution, mainly inAsia and Latin America,is unbalanced. And investors are morediversified, although state-owned enterprises dominate with itsproportion decreasing. Also, more SMEs are participating in outwarddirect investments.This paper reviews the historical evolution of China’s industrialstructure adjustment.Since the reform and opening up, the output value of the structure of China’s three industries has beenrationalizing, and the employment structure optimizing. The thirdindustry has developed rapidly, the labor-intensive industries, such astransportation, retail, accommodation and catering account for a largeproportion, and the capital and technology intensive industries, suchas bank, securities, insurance and real estate account for a smallproportion. The whole manufacturing industry whose scale is hugeand technical level is not high is still in the low-end of the globalindustrial chain despite the fact that a few industries performexcellently. To China’s industrial structure adjustment, there areseveral favorable factors, for example, the per capita GDP is morethan$5000, the factors of production structure has been improved. Atthe same time, it has to face challenges, such as the rising ofproduction cost continually, insufficient ability of independentinnovation and difficult coordination of region.Based on the analysis of evolution rule and influenced factors ofindustrial structure adjustment, this paper inquires into themechanism of ODI and adjustment of industrial structure of thecountry. And it has built up indicators to measure the effect of theadjustment of industrial structure. By the grey relational analysismethod, it has been shown that market seeking ODI, such as leasingand business services, manufacturing, transportation, storage andpostal industry can effectively promote the optimization of thedomestic industrial structure. The mining industry and other naturalresource seeking ODI are important guarantees for the optimizationof industrial structure.The effect of technology seeking ODI on industrial structure optimization is not obvious temporary. Thefinancial sector ODI is not significant in influencing the optimizationof the industrial structure. On the basis of theoretical and empiricalstudies, this paper presents recommendations for policies frommacroscopic to microcosmic perspectives, in order to make China’soutward direct investment effective in promoting the adjustment ofindustrial structure.