Research On The Effect Of Foreign Direct Investment On China’s Employment

With the development of domestic economy, the scale of our country that attract foreign direct investment (FDI) has been expanding. Since 1992, China has become the second largest FDI in the world, only behind America. After joined the WTO, China became the country that attract the most FDI, overpass the United States. Although the current world economy is facing difficulties and uncertainties, which brought great challenge for China to attract more FDI. According to the related report, even though the inflows of China’s FDI fell in 2012, China still kept its position as the most attractive country for FDI.China is the country that has the most population in the world. It is urgent for the government to solve the employment problem. Since China chose to deepen the reform and opening up policy, it has attracted a large number of FDI into the domestic market. FDI plays an important role in the process of China’s economic development. The employment is one of the aspects that FDI brought about. Along with the increasing inflows of FDI, foreign companies adopted different ways to invest in Chinese market, and the technical content of foreign investment gradually changes, so the impact of foreign investment on China’s employment constantly changes. In order to know the effect of FDI on employment and take better use of FDI, it is important and practical to analyze the effect of FDI on our country’s employment. In order to thoroughly analyze the effects of FDI on China’s employment, both qualitative and quantitative analysis is used.In the first, the related theories about FDI and employment are introduced and review the existing foreign and domestic literature. Then it chooses to describe the situation and characteristics of our country’s FDI. Based on describing the transmission mechanism of FDI on employment, the quantitative analysis is continued. This analysis sets up equation between FDI and employment based on existing micro and macro theories. The direct and indirect effect that FDI has on employment is included. The empirical analysis uses the latest data from 1985 to 2012. Finally, based on the empirical analysis, the following conclusion can be received:Firstly, the FDI has directly positive effect on Chinese employment. Secondly, the positive effect of domestic investment on employment is larger than that of FDI; Then, though the negative effect of FDI that has on domestic investment, FDI indirectly has negative impact on employment. Fourthly, though the positive effect of FDI that has on total labor productivity, FDI indirectly has negative impact on employment; Fifthly, as the positively direct effect of FDI that has on employment is larger than the indirectly negative effect, the total impact of FDI having on employment is positive.