Research On The Impact Of Foreign Capital Liberalization Index On China’s FDI In Service Industry

The global economic crisis triggered by the US subprime mortgage crisis has caused international manufacturing trade to fall into a downturn,with the service industry’s quick rise.China,however,due to the small fluctuations and the stable domestic political and economic situation,is favored by the foreign economy.Thus the service industry has developed rapidly,whose proportion in the national economy has steadily increased,gradually replacing the manufacturing industry and becoming the industry with the fastest growth speed and the highest contribution rate.At the same time,the international economic and trade environment is also changing.There are more terminology related to service industry in major statistical databases,and many new trade topics have been added to new trade agreements.Changes in domestic and international service trade have put forward new requirements for China’s opening up.China should accelerate the establishment of a perfect foreign direct investment access system for the service industry.Chinese service industry is opened up late,only maintaining the service sector that must be opened up for the development of manufacturing industry.China has not accelerated the opening process of service industry until the accession to the WTO;the degree of openness is very low,which is incomparable to the developed countries,and there is no advantage compared with countries with similar development levels,such as Russia,India and Brazil.Formulating and implementing the service industry’s open policy is limited by the special national security attributes of certain service industries,which lead to a comparatively high degree of foreign direct investment access.The statistics of any international organization cannot reflect the liberalization of foreign direct investment in China’s service industry.To study China’s problems,we should fully consider the actual situation of China’s politics and economy and consider the relevant policies of service industry FDI to build an applicable foreign investment liberalization index.Unlike the openness of manufacturing,the openness of the service industry is more.The opening of the manufacturing industry is usually measured by the level of tariffs and has a relatively complete computing system;however,as to highly differentiated service industries,there are different attributes and traits between producers in different industries;what is more,the consumers in various industries are highly differentiated.Therefore,barriers related to the service industry are often reflected in the form of non-tariff barriers,which are more complex and concealed.Therefore,the solution is to obtain a foreign investment liberalization index for each service industry by quantifying the government’s policy of using foreign investment in services,and then to study the relationship between foreign investment liberalization index and FDI at the industry level.Statistics show that after China’s accession to the WTO,FDI in the service industry has grown rapidly,steadily surpassing manufacturing FDI.However,the government’s restrictions on foreign investment in services are still high,not only far from developed countries,but also from a global perspective.This number dropped significantly when China joined the WTO,and then remained stable with only a few changes until the second big wave of decline in 2015.At the industry level,there is a very unbalance development trend.Some industries,such as the accommodation and catering industry,have a small foreign investment liberalization index;while the financial services industry and education have maintained a high level of foreign investment liberalization index.The empirical results show that there is a significant negative correlation between the foreign investment liberalization index and the FDI of various industries,indicating that the foreign investment liberalization index does have an impact on attracting service industry FDI.More policy restrictions,slower growth of FDI.In addition,even if the foreign investment liberalization index remains unchanged for many years,the service industry FDI is still rising year by year.On the one hand,this indicates that there are other factors affecting FDI;on the other hand,it shows that the adjustment of China’s foreign investment access policy lags behind the actual use of foreign capital,which means that Chinese government gives few encouragements to use FDI.In other words,there will be more FDI in China’s service industry as long as positive encouragements are given.