The Impact Of FDI In Service On Employment In Service Industry

Over the past ten years,the share of FDI in our service industry to the aggregate amount has increased rapidly.It was in 2011 that the amount of FDI flow into services has overtaken that in manufacturing for the first time.Since then the gap in between has been widening.By the end of 2015,the share of FDI in services was up to 64.26%of the total amount.It can be seen that with the economic transformation and industrial upgrading,China’s economy is increasingly moving towards a service-oriented trend.This trend in employment is already obvious.Our national employment has seen a rapid growth both in raw and comparative numbers.Service industry has become our nation’s main channel to take in labor.As a double rapid growth is found in both FDI in service industry and employment,is there a long-term stable relationship in between?An inquiry into this question is expected to yield evidence for policy making in promoting economic restructuring,and in releasing burden in employment.The present study aims to address this question.Its contribution is found in a case study of China’s three largest urban agglomerations,a largest recipient of FDI in service industry in attempt to explore how FDI in service industry influences employment in service industry in terms of quantity and quality.The study first reviews related literature and finds its niche in examining China’s three largest urban agglomerations,the most heavily invested areas by foreign investors in service industry.It focuses on previous research on the impact of FDI on employment in the following three perspectives:by areas at different economic development levels,in the long run and short-term run,as well as skills-based labor,followed by a parallel perspective of FDI and employment in a single industry of service.This findings provide a basis for an empirical model setup.Then the study moves to an in-depth analysis of characteristics of FDI and employment in our national service industry.A step by step analysis from general to specific points to the fact that despite a double rapid growth of China’s FDI and employment in service industry,a respective serious unbalance exists with a concentration in traditional types of service industry.And what’s more,service industry FDI inflow into China’s three largest urban agglomeration is more than that into China in some years.Followed a further examination is taken into the impact of service industry FDI on employment in service industry,in terms of number and in terms of quality as well.The findings suggest that FDI has both direct and indirect impact on employment in service industry,and through competition effect,spillover effect and incentive effect FDI has a positive impact on the quality of employment.On the basis of qualitative analysis,there is an empirical test of the above propositions by using a time series data of China’s three largest urban agglomerations published by China Annuals of Statistics(years 2005-2014)on the basis of fixed effect model and random effect model.The influence of FDI on the employment quantity and employment quality of service industry is defined.The empirical results show that:(1)The service industry FDI is weak in increasing employment quantity in service industry,but significant in enhancing the quality of employment;(2)And domestic investment in fixed assets for employment quality and employment quantity has significant impact;(3)Counterintuitively,the improvement of human capital has no significant impact on the quality of employment.The study concludes with suggestions for policy decision-making:(1)to introduce and encourage FDI of different types in service industry on the basis of local economic development level;(2)to raise awareness of and strengthen intellectual property protection before an introduction of FDI of high-end technology content in service industry;(3)to open more of our service market,and enhance its quality of employment;(4)to take measures for bringing human capital to full play;(5)to differentiate FDI in services for more efficiency and quality of our national employment.