The Impact Of China’s Outward Foreign Direct Investment On Domestic Employment

Since China formally proposed the "going global" strategy in 2001,China’s outward foreign direct investment has grown steadily.Now it is the world’s second-largest foreign investor,investing in regions all over the world and investing in all sectors of the national economy.Since 2001,although China’s employment has steadily increased,the employment rate has continued to decline,and the number of unemployed in urban and rural areas has increased rapidly.The industrial hollowness caused by outward foreign direct investment in developed countries and the employment problems caused by it have to also attract our attention.This article first fully demonstrates the overall impact of Chinese OFDI on domestic employment.The study found that OFDI with different investment motivations has different impacts on employment.Currently,there are many types of OFDI in China,and the overall impact on employment is not clear.After establishing a regression model using inter-provincial panel data,we found that China’s OFDI has a certain negative impact on domestic employment in general,and there is no time lag.After drawing the conclusion that OFDI has a negative impact on domestic employment,this article further explores the transmission mechanism of the impact of OFDI on domestic employment in China.Qualitative analysis found that OFDI will affect employment by affecting intermediate variables such as export trade,domestic investment,and domestic consumption.By introducing the cross-terms of the intermediate variable and OFDI in the regression model,it is found empirically that China OFDI will promote employment by increasing export trade,reduce employment by squeezing domestic investment,and promote employment by increasing domestic consumption.In other words,the negative impact of Chinese OFDI on domestic employment mainly comes from the squeeze on domestic investment.Finally,this article further discusses the major industry sources of the negative impact of Chinese OFDI on domestic employment.The study found that leasing and business services,wholesale and retail,manufacturing,construction,mining,and other industries are both the industries with the most direct foreign investment and the major domestic employment undertakings.The empirical results show that manufacturing,leasing and business services,and the mining industry have a significant negative impact on employment in this industry.In addition,due to the large base of employment in the manufacturing industry,the negative impact of manufacturing on employment is the main resource to the negative effect of overall employment.In view of the above analysis,finally put forward the corresponding policy recommendations: First,carefully advance the pace of China’s OFDI.Second,focus on China’s OFDI squeezing domestic investment.Third,adjust the structure of foreign direct investment in manufacturing and improve the negative effect on employment.