A study on the mechanism and character of the industrial and spatial transference of FDI in China

Abstract

In the last two decades, China has become one of the areas that have the greatest potential in industrial production, thus it has ranked second only to USA in the flow of international capital. By the end of 1998, the real value of FDI (Foreign Direct Investment) in China has utilized has added up to $268.1 billion. The big flow of FDI has not only promoted the development of social economy, but also worsened the existing regional difference by choosing spatial location. Under this circumstance, China’s economy faces new restrictions and opportunities while adjusting its regional structure and industrial structure. So it is more and more important for us how to seize the opportunity, to seek the regularity of FDI in choosing location from the aspect of space, to set up relevant strategy to direct FDI at inland regions (areas deficient of capital), and to make appropriate policies, esp. the industrial and regional policies so as for FDI to exert positive influence and avoid negative influence on China and its regional economy and society. Based on the latest domestic and overseas materials and data of the FDI in China, combining with the investigation of the enterprises, this paper has systematically revealed the progress of development of the FDI in China and the developing conditions of the main enterprises directly invested by foreign capital since the reform and opening-up in China. The characters of FDI such as spatial concentration, transference as time goes on, change of the technical content and up-gradation of industrial structure and their forming mechanism have been studied. Then the basic conclusions have been made as follows. Firstly, FDI has been highly concentrated in space. But as time goes by, it has been transferring from coastal regions to inland ones, from big cities to their surrounding districts, and the degree of concentration is decreasing. Secondly, the technical content of the invested projects has gradually increased and the up-gradation of the industrial structure is obvious. Thirdly, the regional choice of the FDI in China is mainly affected by labor and other productive factors. The relative change of the cost of productive factors in different regions since the reform and opening-up is one of the main factors that have caused the spatial transference of the FDI in China. Fourthly, as people’s income increases and the accumulation of the capacity of the technique and labor advances, FDI whose aim is to get more market has increased and tended to transfer from coastal regions to inland ones. Fifthly, the changes of the industrial structure of the main areas and countries who have directly invested in China and the changes of inter-regional industries and regional policies in China are also the important factors that affect the industries directly invested by foreign capital and their spatial transference.