| This thesis is an empirical study on the effects of outward foreign direct investment(OFDI) on domestic investment. It is carried out on China’s evidence. As to whether OFDI has positive effects on domestic investment, the existing literature presents a wide spectrum of opinions. Some say yes(e.g., Herzer & Schrooten, 2007), some say no(e.g., Feldstein, 1995; Sauramo, 2008), and still some others are not sure(e.g., Hejazi & Pauly, 2003). Therefore, there is a need for the academic community to pay much more attention to this topic. On the other hand, the transformation of China’s economy from a developing one to a developed one doomed or hoped to be completed in the coming decades or so calls for sound theories applicable to the forming and reshaping of the relevant strategy and policies, as a country during such a stage of development will certainly experience growing outward FDI, lower economic growth, and a weakening role of domestic investment in spurring the economy. The above two facts have motivated me to open up this study. This paper launched econometric study by taking China’s evidence at two levels, designing toexplore the general rules of the effects of outward foreign direct investment(OFDI) on domestic investment, achieving innovation ofresearch methods and research topics. First, the time-series regression method is applied to investigate the overall effect of OFDI on domestic investment. In doing so, we take the macro data of China’s outward FDI and domestic investment in the 1990-2013 period, setting the ratio of gross capital formation to GDP(DI/GDP) as the dependent variable, and the ratios of OFDI to GDP(OFDI/GDP), inward FDI to GDP(IFDI/GDP) and total savings to GDP(TS/GDP) as the independent variables. A regression equation is reached by excluding variables. The result shows that each additional unit of OFDI will lead to an increase of 3.258167 units of domestic investment. Secondly, by using the industry data of China’s OFDI and domestic investment in the years between 2004 and 2013, a meso level panel-data regression study is carried out. The result shows there are two types of effects of China’s OFDI on domestic investment among the 18 industries. Due to the differences in industrial characteristics, investment subjects, investment motives as well as government policies among these industries, the effects of outward FDI on domestic investment among these industries are different. The positive effects exist in the following ten industries: Agriculture, Forestry, Animal Husbandry and Fishery; Manufacturing; Construction; Hotels and Catering; Real Estate; Business Services; R&D; Resident Service; Social Security and Health; and Culture and Entertainment. Various factors contribute to this situation, including the gap filling of production factors, the transfer of marginal industries, the reverse spillover of technology(knowledge), investment income effect, and the scale effect of export expansion. The negative effects exist in the following eight industries: Mining; Electricity, Gas and Water; Transportation, Storage and Postal industry; Information Transmission, Computer Services and Software; Wholesales and Retails; Financial Services; Water Conservancy and Environment; and Education. The contributing factors are export scale tightening, the increasing of social average productivity, the avoidance of trade barriers, and following the leaders. Nevertheless, the result shows that the negative effects are relatively weak. Therefore, the effects of China’s outward FDI on domestic investment are more likely complementary rather than substitutive. The results confirm our initial point of view, that is, China’s OFDI has positive effects on domestic investment. Secondly, it has testified the model of the effects of outward FDI on domestic investment. Finally, the result has rich policy implications. Outward FDI aimed at transaction cost reduction and overall benefits improving will stimulate domestic output and domestic investment. Outward FDI aimed at low cost labor by transferring marginal industries will inhibit domestic investment in the short run and increase domestic investment in the long run. Due to the differences of investors’ investment motivation and economic status, outward FDI will have different effects on domestic investment. Generally, outward FDI by stronger investors will more likely result in complementary effects than alternative effects on domestic investment. |
