The Impact Of Foreign Direct Investment On The Competitiveness Of China’s Service Trade

With the in-depth development of globalization, the service industry and service trade have developed rapidly worldwide, and have become the growth engine of world economy and international trade. Currently, the service industry output accounts for about 70% of the world economy, and the service trade’s share is about 20%. Meanwhile, the foreign direct investment has flourished all over the world with its main part transforming from manufacturing industry to service industry which accounts for 2/3 of the world transnational investment. What’s more, in 2011, the foreign investment in actual use of our service industry has exceeded the secondary industry for the first time. The importance of service industry and service trade is becoming more significant, and it’s necessary to do research about the relationship between trade service and FDI.This paper conducts the research both through the theoretical analysis and the empirical study. At the theoretical analysis, we come up with the extended "Diamond Model" based on the original "Diamond Model" as well as the actual situation of our nation’s trade service, and it’s the basic model for the empirical part. At the empirical study, we make the regression analysis by using the time series data of the whole service industry and the panel data of the producer service respectively, and we add specific control variables to the regression models based on the extended "Diamond Model". Both models show that the FDI of the service industry has significantly positive influence on the competence of the service trade, and FDI does Granger cause the export of service trade. Moreover, the control variables such as related or supporting industry, rivalry and technology also have significant impact. Given the theoretical analysis and the empirical study, we put forward some policy proposes about the utilization of FDI and the development of trade service in the last chapter.