Study on the Effect of the Variation of FDI on Shandong Industrial Structure
|School||Ocean University of China|
|Keywords||Foreign Direct Investment (FDI) Industrial Structure Adjustment Capital Supplying Technology Spillover|
Since 1981, the first foreign direct investment went into the province, more than 20 years, the introduction of foreign direct investment in Shandong Province have been developed rapidly in terms of quantity and quality. In general, FDI continued to increase the scale, gradually increase the technological content, and gradually make the investing area wider. In the more than 20 years, Shandong Province enjoy a economic rapid growth period. The core of economic growth is the evolution of industrial structure. During this period, profound changes of industrial structure in Shandong Province have taken place. The proportion of primary industry in GDP continued to decline, the proportion of the second and third industry in GDP continued to rise. And the industrial structure development is going to rationalize. FDI and industrial structure in the process of change at the same time, and FDI has played a major role in the evolution of in Shandong Province’s industrial structure. Foreign direct investment enterprises bring abundant capital and advanced production and management technology, which lead the province owned enterprises to improve technology and to promote the industrial structure upgrading.This paper reviews the theories of the effects of foreign direct investment on industrial structure of host country. The "flying geese model", the product life cycle theory, and the marginal theory analysis of the industrial transfer provide a complete theoretical framework of foreign direct investment’ effects on the industrial structure of the host country. Subsequently, this paper gives analysis of foreign direct investment in Shandong Province and Shandong Province’s industrial development process, current situation and problems. Then in the theoretical and empirical analysis, foreign direct investment affects the industrial structure by the supply of capital and technology spillover. The results show that FDI on domestic investment in Shandong Province has obvious crowding-in effect and that FDI will promote the Shandong Province’s total domestic economic growth. And FDI in Shandong Province had a technology spillover effect, that is, the promotion of FDI in Shandong province will raise the level of Shandong Province’s technology. Taking into account the two ways that FDI affect the industrial structure of Shandong Province, this paper take FDI/GDP on behalf of the scale of FDI capital supply and measure the impact of technological spillover effects by adding two important factors-Shandong Province market openness and human capital stock as explanatory variables and take the proportion of three industries in GDP as explained variable to set a econometric model. The result shows that the size of FDI has weak negative effect on the primary industry, a significant positive effect on the secondary industry, and a significant negative effect on the tertiary industry. Market opening degree has significant of negative effect on the first industries and has significant positive effect on the second and tertiary industries. Human capital stock has a significant positive effect on the primary industry; a weak negative effect on the second industry has a significant negative effect on the tertiary industry.Today, Shandong Province’s economic development is about to enter a new period of economic growth mode changing from extensive to intensive face-type. And industrial restructuring is an important part of the changing way of economic growth. Based on the analysis of the previous text, foreign direct investment plays an important role in the industrial structure adjustment. This paper proposes countermeasures to develop a reasonable policy of attracting foreign investment and the right guide to foreign direct investment to speed up industrial restructuring and promote economic development.