Study On The Market Effects Of Chinese Manufacturing Industry OFDI

Based on the observations and reflections of the following two phenomena, this paper studies the market effects of Chinese outward foreign direct investment(OFDI).First, faced with the background of economic globalization and domestic policy change, Chinese enterprises began to seek survival and development space in the international and domestic markets. Second, Chinese OFDI has continued to grow rapidly.In this paper we study on the problems about whether there is any association between the two phenomena,and how it is.In order to further understand the market effects of OFDI, this paper explores the formation mechanism of export market effects and domestic market effects, and proposed four hypotheses, laying the foundation for empirical analysis.For a more comprehensive analysis of the market effects of OFDI, this paper classifies the enterprises with four kinds of criteria. Under the ownership criteria, there are indigenous enterprises and foreign enterprises; under the host country criteria, there are enterprises investing into developing and developed countries respectively; under the entrance mode criteria, there are mergers and acquisitions(M & A) and green-field investments; under the market orientation criteria, there are domestic- market- oriented enterprises and export- market- oriented enterprises. Using the system GMM method and enterprise data from 1998 to 2007, we found some results:First, the quantity of OFDI has a positive effect on indigenous firms’ exports, but the scope of OFDI has a negative effect on their exports. The quantity of OFDI has a negative effect on domestic sales of state-owned enterprises(SOEs), but has a positive effect on domestic sales of privately-owned enterprises(POEs). The scope of OFDI has a positive effect on domestic sales of SOEs and POEs. Second, OFDI in developing countries can promote enterprises’ exports and domestic sales. The quantity of OFDI in developed countries can reduce enterprises’ exports and domestic sales, the scope of OFDI in developed countries can simultaneously promote domestic sales and exports. Third, for enterprises selected green-field investments, the quantity of OFDI have no significant impact on exports and domestic sales, the scope of OFDI have a simultaneously positive effect on exports and domestic sales. For enterprises selected M & A, the quantity of OFDI will reduce the domestic sales, and the scope of OFDI will increase exports and reduce domestic sales.Forth, the scope of OFDI can simultaneously promote domestic sales and exports of domestic- market- oriented enterprises, OFDI of export- market- oriented enterprises have limited impact on exports and domestic salesFinally, after reviewing the literature, exploring the formation mechanism of market effects, and analyzing the empirical results, this paper draws some conclusions and makes suggestions.