A Study On The Crowding - Out Effect Of FDI On Domestic Investment In The Tertiary Industry Of Beijing

At the beginning of reform and opening up, the entry of foreign direct investment,had made up for the savings gap of Beijing and promotedits economic growth. Butwith the rapid development of economy, while the foreign direct investment increased,the savings of Beijing gradually increased too, and in1989the balance of residentsavings deposits of Beijing had already surpassed its total social fixed assetsinvestment. Then, as the shortage of funds was eased, what kind of impact will beproduced on domestic investment when Beijing continues to use a large-scale foreigndirect investment? Will it crowd out domestic investment? Since the third industryoccupies an important strategic position in the economy of Beijing, analyst on theimpact that foreign direct investment produces on domestic investment within thethird industry of Beijing would have important theoretical and practical significancefor Beijing to develop foreign policies.This thesisfirst described the mechanism of FDI’s impact on domestic investment,and then introduced the characteristics of the foreign direct investment and itsrelationship with total investment within the third industry of Beijing. On this basis,amodellearning from Agosin andMayer was estimated for a panel of data for6industries subdivided in the third industry over the period2003-2013. The resultsshowed that the foreign direct investment had significant crowding-out effect on thedomestic investment within the third industry of Beijing. Main reasons were analyzedas follows: the domestic financial market is not perfect; foreign investors enjoypreferential policies; foreign and domestic enterprises invest almost the sameindustries;the industries that foreign investmentsmainly focus on have little influenceon other industries;and the foreign enterprises have obvious tendency toproprietorship. Finally, corresponding policy proposals in view of the above situationwere put forward.