The Spill-over Effects Of FDI On Local Industrial Sectors

Since the implementation of the reform and opening, the economic developmentof China has made a considerable progress. Compared with1978, GDP increased bynearly23times, and the per capita GDP grew by16times in2011. With thecontinuous economic growth, Chinese opening has got a further improvement; theforeign economy has become an important economic growth point of Chineseeconomic. Through continuous import of foreign capital, both of the accumulation ofcapital and the efficiency of technology have made a vital development. With thegradual academic research on FDI, the importance of FDI spillovers has gain morepublic attentions. By using the FDI spillover, the production of local businesses hasbeen promoted, and it has also become an important objective of attracting foreigninvestment.This essay observed the relation between the Direct investment spillovereffect(DISE) and the output of local companies and concluded the regular pattern toreach the spillover effect, taking examples by Guangdong and Jiangsu provinces.Firstly, the essay reviews the related references of DISE, and then uses data to analyzeFDI source, market direction, human resource, fixed-assets investment and therelationship between R&D input and spillover effect in two provinces. After that,Panel data model will be used in the empirical research on the relationship betweenDISE and output of local company based on the data of28industries of two provincesfrom2004to2011, in order to compare the differences among these two regions’local industry spillover effect. The conclusion indicates that FDI affects the localindustry spillover positively in Jiangsu province, while it affects the local industryspillover negatively in Guangdong province.Lastly, three suggestions was provided. Basically, the government shouldadvance the investment environment of foreign business to expand the scale offoreign investment. At the same time, the equal competition environment should becreated to attract the talents, keeping the confident of foreign investment. Moreover,the investment in science research should be expanded to speed the technologyprogress.