| Governmental industrial policies have significant influence on industrial performance. Many developing countries that lack capital and a good technology base use foreign direct investment (FDI)-dependent governmental policies to induce multinational corporations (MNCs) to invest in their indigenous immature industries. In this article, the Chinese automotive industry, which is regulated directly under the Chinese central government, is used to illustrate the interactions between the complex FDI-dependent governmental policies and the industrial development of developing countries. According to changes in Chinese automotive industry policy, the Chinese auto industry's development process is divided into four phases: extremely passive FDI- dependent policy phase, partial strategic FDI-dependent policy phase, ISI restructuring phase, and industrial upgrading phase. Considering those four phases, the overall industrial characteristics and policies of China's automotive industry are introduced and analyzed. Then, a systematic analysis is carried out to explore the key reasons for the policy failure and distortion. The results indicate the successful application of FDI- dependent industrial policies is subject to numerous conditions, such as the content of policies, policy implementation, and the economic environment of a country. In the end, a few policy recommendations, including reforming the ownership structure of state- owned enterprises, promoting mergers and acquisitions between inefficient firms in order to attract high-quality investment from MNCs, etc., are proposed. |
