The Study Of The FDI On The Impact Of TFP In China’s Service Sub-Industry

Since China’s WTO entry, service trade has achieved tremendous development while trade in goods realizing a rapid growth. The focus of foreign investment begins to shift from secondary industry to the service industry. The year of 2011 witnessed the first time for FDI of total trade in service industry overtook that of manufacturing industry. In 2014, the service industry’s FDI of total investment has exceeded 60%. With the service industry playing an increasing prominent role in the national economy and a continually improved investment environment, the advantages of China’s service industry are taking shape to attract foreign direct investment. Based on the status analysis of absorbing FDI in the service industry, the paper calculated the total factor productivity and its decomposition value of all the service providers in the service industry. It finds that all the providers in service industry, has a positive total factor productivity average growth rate per annum except for accommodation and catering services. The growth of total factor productivity (TFP) mainly stems from the improvement of technological changes rather than technical efficiency. And the research finds that productivity of producer services contributes more to consumer services in terms of the added value to the industry. Then according to panel data from altogether 143 observations, empirically analyzing the influence of service industry absorbing FDI and relevant effect factors on producer services, consumer services, and the total factor productivity of public services. It reveals that FDI has exerted its influence on the total factor productivity (TFP) of all the three industries, producing a positive effect on the TFP of producer services, while on the TFP of consumer services and public services, the effect is negative. Among which FDI inflows have a significant positive effect on technological changes (TC) while impact remarkably to technological changes (TC) in consumer services and public service, but showing a positive effect on their technological efficiency (EC). Based on the research results, it provides policy proposals for providers of service industry on how to efficient use the FDI spillover effects in the future, how to increase total factor productivity in service industry and how to promote the healthy and stable development of service industry.