A Study Of The Effect Of FDI On Technical Efficiency In China

Since reforming and opening up, especially in the early90s in last century, the scale of China’s absorption of foreign direct investment (FDI) expands unceasingly. FDI has been making important contribution to China’s economy growth, technical efficiency improvement etc. Meanwhile, China’s economy growth doesn’t get rid of the extensive mode of growth, and the income gap among different regions is widening with the economic development. Therefore, improving technical efficiency, accelerating the economy-growth mode change, adjusting the regional income gap are very important for China’s economic development at the present stage. Based on the above background, studying the effect that FDI makes on China’s technical efficiency is of great significance for exploring how to make better use of FDI to improve the production technical efficiency, speed up the transition of economic growth style and decrease the gaps between different regions in China.Based on the theory related to FDI, technical efficiency and the mechanism of FDI affect technical efficiency, this paper analyses the short-term effect and long-term cumulative effect that FDI makes on China’s technical efficiency and explores its difference between different regions, all above are carried out by using the panel data of each provinces from1985to2012and stochastic frontier function (SFA) method. The innovations of this article lie in selecting the whole industry as the object of this study, then conducting the empirical analysis on both short-term and long-term effects that FDI effect on technical efficiency in China by using FDI flow index and FDI stock index, and exploring its difference between different regions with regional perspective, thus it may provide a new perspective for searching the reason of regional income gap in China.The main research conclusion includes:there exists differences between the short-term and long-term effect that FDI brings on the technical efficiency in China; even though the influence that FDI has on technical efficiency is consistent with all samples when empirical analysis was made towards regions samples in time dimension, the extent varies in three regions, it is steeper in eastern area than middle area and western area; opening degree, human resources etc. can affect technical efficiency to some degree.