China’s Outward Foreign Direct Investment And Service Industry Growth

In the past ten years,China’s outward foreign direct investment has been mainly in the service industry.Does the growth of China’s foreign direct investment significantly promote the growth of China’s domestic service industry? What are the specific impact mechanisms? The report of General Secretary Xi Jinping at the20 th National Congress of the CPC pointed out that we should adhere to the direction of the reform of the socialist market economy,adhere to a high level of opening up,and accelerate the construction of a new development pattern with domestic circulation as the main body and domestic and international double circulation promoting each other.In the context of China’s economic development,studying the impact of China’s outward foreign direct investment on the growth of China’s service industry is not only of great significance for China to accelerate the construction of a new development pattern,but also of great practical significance for developing countries including Thailand to learn from the successful experience of China’s economic development.At present,there are relatively few literatures at home and abroad on the impact of OFDI on the growth of the service industry.The basic conclusion of the existing literatures is that OFDI will have a significant positive impact on the growth of the service industry,but the existing literatures lack sufficient research on the impact mechanism.In the past ten years,China’s outward foreign direct investment and service industry have maintained a common general trend of basically rising.However,compared with developed countries,China’s service industry added value still accounts for a relatively low proportion of GDP,with more than 70% in major developed countries.However,China’s service industry added value accounts for 54.50% of GDP in 2020.The theoretical analysis of this thesis shows that foreign direct investment can gain the advantages of the host country’s advanced technology,promote domestic R&D innovation,improve the ability of employees in the home country,increase the number of R&D personnel,and promote the change of employment structure.Only when the accumulation of human capital and the R&D and innovation capabilities are raised to a higher level can the labor productivity of the home country be improved,the economic scale be continuously expanded,the production cost be reduced,and the industrial structure upgrade and the service industry continue to grow rapidly.The research results of this thesis show that China’s outward foreign direct investment can significantly promote the growth of the service industry.The specific impact mechanism is that outward foreign direct investment can promote the growth of the service industry by significantly improving the level of R&D innovation,human capital accumulation,and employment level of the service industry,but it can not promote the growth of the service industry by significantly improving the level of labor productivity of the service industry.The regional heterogeneity test shows that China’s outward foreign direct investment will have a significant positive impact on the growth of the service industry in the eastern and coastal regions,but it will not have a significant impact in the central and non-coastal regions,while the coefficient of outward foreign direct investment in the western regions is significantly negative.Put forward suggestions based on the above conclusions :(1)Continue to do a good job in all aspects of outward foreign direct investment in the construction of a new development pattern,and promote the growth of the service industry through the scale expansion and structural adjustment of foreign direct investment;(2)Focus on giving full play to the technology feedback effect and human capital accumulation effect of outward foreign direct investment to the technologically advanced countries,so as to promote the improvement of domestic productivity and the growth of the service industry;(3)Combine the transformation and upgrading of domestic industrial structure with the structural adjustment of foreign direct investment,and give play to the positive role of outward foreign direct investment in promoting the growth of the service industry;(4)Improve the service system related to domestic and outward foreign direct investment and promote employment growth in the service industry;(5)We will promote the coordinated development of outward foreign direct investment in the eastern,central and western regions,and raise the level of outward foreign direct investment in the central and western regions.