The Study Of Core Area And FDI Heterogeneity In China Under The "One Belt,One Road" Strategy

Foreign direct investment is the main pattern for China to integrate into the global economy and to participate in global value chains.During preliminary stage of reform,inflows of foreign capital remarkably improved the level of production technology,foreign exchange reserve and the scale of foreign trade,which motivates economic growth.Initially,foreign capital mainly flowed into the east of China and manufacturing industries,targeting at the low labor costs and abundant natural resources.With the development of economy and trade in domestic and foreign areas,the scale of FDI is enlarged and the structure is optimized.Along with the global economy entering into the "New Normal" period,domestic market gets saturated with manufactured products,and the demand of export is shrunk.Due to the Rising labor costs,domestic industrial structure experiences profound adjustment,and international manufacturers also shift their production bases to other counties,which may impact the scale of FDI and the export trade of China.To solve this situation,Chinese government puts forward "One Belt,One Road" strategy,which mainly balances the development of east,middle and west regions in China,promotes westward opening strategy,encourages the west region to develop opening economy,undertake superior industries from the east region and enhance the cooperation among provinces.On the other hand,"One Belt and One Road" strategy is dedicated to promoting the transformation of FDI and industrial structures in the east region,forming nationwide economy integration,and improving the quality and technical levels of FDI.The paper studies research results and FDI theories from domestic and foreign areas.Based on original studies,the paper proposes the combination of FDI heterogeneity and positional conditions,and analyses the correlation of those factors.In this paper,the FDI Heterogeneity is distinguished as manufacturing FDI and service FDI,and motivates and technology of foreign capital are also distinguished by industries.Based on regional conditions and comprehensive advantages,the paper chooses market capacity,labor cost,agglomeration effects,institution,industrial structure,infrastructure and human resource as driving factors to FDI Heterogeneity.According to relevant empirical findings,the paper establishes panel models of east,middle and west regions respectively,and chooses market capacity,labor cost,agglomeration effects,institution,industrial structure,infrastructure and human resource as explanatory variables.The empirical findings show that driving factors have different effects on FDI Heterogeneity.The first one,agglomeration effect,labor cost,institutions and industrial structure are the main motives of FDI inflows in manufacturing;market capacity,agglomeration effect,human resource and infrastructure are the main motives of FDI inflows in service sector.The second one,eastern region is in the transformation process of capital and industrial structures,the inflows of manufacturing FDI are blocked by rising of labor costs and saturation of market capacity,and improved by agglomeration of industries;On the other hand,the inflows of service FDI are supported by market capacity,human resource and infrastructure.With the supports of government,the amounts of FDI inflows to manufacturing more than service sector.The third one,middle region is dedicated to expanding cooperation fields and undertaking superior industries from eastern region,which promote the integrity of opening economy.The inflows of manufacturing FDI are blocked by market capacity and labor costs;the inflows of service FDI are benefited by market capacity,human resource and infrastructure.The forth one,western region is in the preliminary stage of opening economy,local conditions are not optimized enough to attract high-technology foreign capital.It shows empirical results compared with eastern region,inflows of manufacturing FDI are supported by market capacity and agglomeration effect;labor cost and human resources have no significant impacts on inflows of FDI;inflows of service FDI are benefited by agglomeration effect,infrastructure and institutional factors.According to the empirical analysis,the paper proposes recommendations to adjusting plans of attracting FDI and industrial structure.Eastern coastal provinces are core areas of the 21st Century Maritime Silk Road,which is experiencing the adjusting of industrial and FDI structures.It will be beneficial for them to attract high-technology and high-quality FDI,improve the absorptive capacity of foreign capital spillovers,and develop superior industries.Northwest and southwest provinces are core areas of the Silk-road economic belt as opening door to Central Asia,which need manufacturing FDI to accumulate development capital,develop basic industries,and promote the efficiency of production.Middle region should take advantage of geographic,play the role of promoting cooperation between core areas,undertake competitive industries,and strength integration development of opening economy.