Analysis On Transformation Of Local Government’s Investment Promotion Function

Since 1978, investment promotion activities of the Chinese government have been developed for nearly 40 years. During these forty years, investment promotion has made remarkable achievements, which not only promote the rapid development of national economy, bringing a lot of jobs as well, but also introduce advanced technology and management experience into our country, improving people’s living standards. Nowadays, investment promotion has become an important economic function of the local government, which forms a government-dominanted feature。Local government participates in investment promotion frequently and directly by a lot of methods, such as establishing Economic Development Zone, making preferential policies, holding investment promotion activities, etc. Local government plays a major role in economy, which is decided by China’s special conditions. As we know, China’s market economy did not developed naturely, however, it came from the planned economy and was built by the govenment. As the founder, the government should therefore take more part in the economic activities in order to cultivate and develop the market. China’s investment promotion develops the same way. As one part of China’s market economic reformation, the investment promotion is also initiated by the central government as well as the central leaders, and implemented by the local government. Local government’ dominant position in investment promotion is also enhanced by China’s tax and other institutional reasons as well as some other functional and social reasons.However, we must recognize that investment promotion is a kind of market activity. According to the principles of western economics and politics, market should play a decisive role in resources allocation. Therefore, market, instead of the government, should play a major role in investment promotion. When the government pays too much attention to the market, it will cause a series of problems, which will lead to inefficiency and resources-wasting. At present, there are a lot of problems in local government’s investment promotion, such as administrative investment targets and tasks, local government blind competition and the imbalance between government’s input and output, etc.These serious political,economic and social problems prove that the function of local government’s investment promotion must transform from "leading" to "guiding".This paper is based on the background which has been discussed above. Firstly, this paper discusses the orientation and the direction of local government’s economic function, which based on the theory of government’s economic function in the western politics and economics as well as the new public service theory. Secondly, this paper reviews the history of local government’s investment promotion, and takes X District of Suzhou City as an example to analyze the problems and the reasons of government-led investment promotion. At last, the author puts forward the suggestions about how to change local government’s investment promotion from "leading" to "guiding".Although there are already a lot of researches about local government’s investment promotion in China. in this paper, the author still make every effort to analyze it from several aspects based on her personal practical work experience. It will be a great pleasure if this paper can not only amplify the researches of investment promotion, but also push forward the transformation of government’s investment promotion function.