A summary of the research on the effect risk of foreign direct investment in China
Abstract: Foreign direct investment in China has many positive effects on promoting China's economic development and improving the performance of domestic enterprises. However, with the acceleration of the process of foreign investment, the risks of using foreign capital in China have also emerged, which need to be solved and further studied. Under the background of this problem, this paper summarizes and evaluates the recent problems related to capital risks at home and abroad, and puts forward some policy suggestions to avoid risks, with a view to promoting the healthy and sustainable development of China's economic construction.
Keywords: FDI risk policy recommendations
I. Background of the problem
China's achievements in reform, opening up and utilization of foreign capital have attracted worldwide attention. However, with the acceleration of China's strategic process of attracting foreign investment, there are some potential risks in the introduction and utilization of foreign capital in China, which have produced certain negative effects and many problems need to be solved urgently. First of all, some industries monopolized by foreign capital in China crowd out our national enterprises, threatening our industrial security and increasing the risks in the domestic market. Secondly, the dependence on foreign trade is too high, and the export of foreign enterprises accounts for more than 50% of the total export, reflecting that the pulling effect of exports on GDP growth is largely realized by foreign enterprises. China's excessive dependence on foreign capital has affected the security of China's balance of payments and increased the risks in the international market. Third, the technology spillover effect of foreign capital is generally not obvious. The current situation of labor-intensive products in China's exports has not changed, and the trend of continuous deterioration of the trade environment has not been reversed, indicating that the goal of optimizing the export product structure by using foreign capital has not achieved the expected results. Fourth, foreign companies' technological monopoly and restrictive competition behavior have enhanced China's dependence on foreign technology and affected China's ability and enthusiasm for independent technological innovation. The relative backwardness of technology makes the market competitiveness of China's industries and enterprises low and increases the risks in international and domestic markets. Fifth, the contribution rate of foreign capital to overall employment is very low, which is out of proportion to the benefits it has gained in China. At the same time, the regional choice preference of foreign capital has also aggravated the regional economic differences and personal income differences in China.
Although many scholars at home and abroad have conducted effective theoretical discussions on this issue, most domestic experts have discussed the positive effects of foreign investment in general, but only slightly discussed the negative effects of foreign investment, which is not deep enough; Or discuss the negative impact of foreign investment from one side. For example, domestic scholars have used a lot of quantitative and empirical analysis methods in technology spillover and technology safety, but the analysis results are very different, and there are also great differences in statistical measurement standards and methods. As foreign scholars, they analyze the developing countries as a whole, or take China as an example for local analysis, but few of them directly and objectively analyze the specific situation of China. Moreover, the analysis of foreign experts will inevitably look at the China issue from their own perspectives and positions, which may not be completely in line with China's national conditions. Although the negative impact of foreign capital on China's economy and its countermeasures are elaborated in detail, there is a lack of theoretical system analysis, so this study has important theoretical significance. The transition period for China to fully fulfill its obligations to the world is coming to an end. This means that the process of China's integration into economic globalization will be accelerated, foreign capital will enter China at a faster speed, and the trend of international investment liberalization will be difficult to reverse. In the process of actively participating in regional economic integration and multilateral investment liberalization with other countries (especially neighboring countries), the coexistence of globalization and regional economic integration puts China's policy in a dilemma and poses an extremely severe challenge to China's current foreign investment management model; At the same time, with the development of domestic economy, the work of attracting foreign investment has also changed in stages. At present, there is a phenomenon of "double spillover" of domestic and foreign investment, which shows that the purpose of attracting foreign investment at this stage is not simply to make up for the lack of funds, but to focus on the quality and efficiency of attracting foreign investment as soon as possible. At the beginning of 2004, according to the present situation of China's economic development, the state timely put forward the strategic thought of establishing Scientific Outlook on Development, with special emphasis on coordinating domestic development and opening to the outside world, which marked that China's economic development entered a new era. In this regard, China's foreign investment policy must be adjusted accordingly, aiming at improving the efficiency of utilizing foreign investment, avoiding foreign investment risks and making foreign investment better serve China's economic construction under the new situation. Therefore, no matter from the current international environment or domestic situation, it is of great practical significance to study the effect risk of foreign direct investment in China.
Second, the relevant literature review
Western FDI theories mainly discuss the relationship between FDI and investor countries, that is, study the motives and interests of investor countries in FDI, such as knickerbocker's oligopoly reaction theory, Kiyoshi Kojima's "comparative advantage" theory and Hymer's (1976). Barkley and Carson's internalization theory (1976) and Deng Ning's international production compromise theory (Deng Ning, 1977, 1979, 1988). The most famous research on the relationship between FDI and host countries (especially developing host countries) is Chenery & Strout's "two-gap model" (1966), which holds that foreign capital can make up for the savings gap and foreign exchange gap of developing countries and promote their economic development. Therefore, under the guidance of this theory, developing countries have participated in the practice of competing for foreign capital almost without exception. On the surface, developed countries need foreign investment, while developing countries need to attract foreign investment, which seems to be a win-win and mutually beneficial behavior with no risk. Therefore, for a long time, the academic circles have underestimated the potential risks or negative effects of FDI on the host country, and the relevant literature is also very rare. With the outbreak of the financial crisis in Southeast Asia at the end of 1997 and the exposure of the economic problems of attracting foreign investment in Latin America, all circles at home and abroad began to pay more and more attention to the risks of foreign investment. In February 2004, China Academy of Social Sciences hosted the 4th International Forum with the theme of "Reflection and Prospect of China's Foreign Investment Strategy". While affirming the achievements of China's foreign investment, it paid full attention to the negative effects of foreign investment and conducted in-depth discussions. This shows that domestic academic circles have attached great importance to this issue, and the research on related issues has also become the focus in the near future. Because the potential risks of foreign investment are directly reflected in the negative effects of related fields, this paper intends to summarize the negative effects (or potential risks) of foreign direct investment in China from five aspects.
1. FDI effect risk in China's industrial development
(1) industrial safety theory. Foreign capital controls and occupies the domestic market, which restricts the development of national industries and infant industries and leads to the decline of domestic enterprises' benefits. The development direction of some industries, especially emerging industries, is controlled by foreign capital, which makes it impossible for China to form a complete industrial system (Zhang He, 2002), and it is seizing the domestic market along the route of final products-intermediate products-primary products. Because intermediate products can affect other industrial sectors through "forward correlation" and "backward correlation" of industries; The "forward correlation" effect of primary products is great, which has an important impact on downstream industries. The expansion of foreign capital into intermediate products and primary products can control more industries, thus posing a greater threat to China's industrial security (Zhang Yubo and Li Liancheng, 200 1). (2) International monopoly and brand substitution theory. The monopoly of foreign capital (mainly multinational companies) is becoming more and more obvious, which makes China's national industries face severe challenges (Zhang,1999); It is also believed that the monopoly of foreign capital weakens the country's macro-control ability to industry, especially increases the difficulty of coordination among monetary, fiscal and exchange rate policies directly related to industrial restructuring, thus easily causing the host country to fall into the "Mundell Triangle" dilemma. Many national brands are lost, and quite a few industries are full of foreign brands (Happy New Year 2003). (3) The theory of industrial hollowing out. Foreign capital has accelerated the progress and speed of China's "industrial hollowing out", which is embodied in the following aspects: ① foreign capital merger and acquisition is the pillar industry of China, that is, the industry controls risks; ② There is "sunset risk" in industrial structure; ③ The risk of brain drain required by the development of the industry (Yu Zhili, 2000). Through the study of multinational companies, it is found that multinational companies mainly engage in vertical integration investment in China, that is, they transfer one or two links in the whole industrial chain to China, which makes multinational companies lack forward and backward links with enterprises and industries in China, which not only squeezes domestic resources, but also forces China's industries to rely on foreign countries. It is a typical "enclave economy" (Zhang, 1999). (4) The theory of industrial structure deviation. The empirical analysis of the influence of foreign-invested enterprises on China's industrial structure shows that the entry of foreign-invested enterprises reduces the overall efficiency of China's industrial structure, the proportion of manufacturing industry accelerates, and the industries with high technology content are still low and slow, which increases the deviation of China's industrial structure (,Chai Yu, 1998).
2. The risk of FDI effect in China's trade development
(1) On the harmfulness of "enclave" phenomenon. Through the empirical study of China, foreign scholars believe that the rapid growth of China's exports depends on foreign-funded enterprises as never before, while the proportion of foreign-funded enterprises' processing trade is too high, which has little backward correlation with the domestic economy, and the domestic content of exports is low, showing a certain degree of "enclave" phenomenon (Lardy Nicholas R, 1996). When this phenomenon is combined with the inefficiency of state-owned enterprises, there is great risk. At present, China's processing trade accounts for a high proportion of the total trade, and its "two ends are outside" characteristics determine that the import and export of processing trade have a low correlation with domestic production factors, which belongs to a typical "island economy" or "enclave economy". In the long run, this will lead to extensive growth of foreign trade, aggravate the low-level structure of export commodities, increase dependence on foreign countries, and damage the autonomy of China's foreign trade development (Wang Yungui, 2000). As for the harm of "enclave economy", some scholars pointed out that if we don't pay attention to the improvement of independent innovation and development ability in attracting foreign investment, it will bring obvious "enclave effect" and lead to an increase in dependence on foreign technology. When the sedimentation cost is not high, the "enclave economy" will migrate with the loss of local labor cost advantage (Yang Lei, 2002). In the research on the development of export-oriented economy and science and technology industry in the Pearl River Delta, some scholars have also put forward similar views. They think that in the process of developing export-oriented economy, China should avoid repeating the mistakes of the development model of science and technology industry in East Asia. The shortcomings of this model can be summarized by the concept of "export platform". Its operation mode is to create an "enclave economy" in underdeveloped countries and regions that is beneficial to foreign investors, and to protect the non-proliferation of core technologies while utilizing the cheap resources of the host country (Cai Bing, 65438+). (2) The dependence on foreign trade is high. At present, China's dependence on foreign trade is high, the import and export trade is unbalanced, the demand elasticity and supply elasticity of export commodities are high, and the demand elasticity and supply elasticity of import commodities are low. In this way, with the expansion of import and export trade, the dependence of China's export products on overseas markets will be greater than that of importing countries on the supply of China products, and at the same time, the dependence of some domestic industries on imported products will be greater than that of other countries on the China market (Yin Xiangshuo, 2004).
3. The risk of FDI effect in China's technological progress
(1) Technology spillover benefits are not significant. Young, Stephen and Lan Ping (1997) use Granger causality test to find that the technology spillover effect of foreign capital in China is very limited. Jiang (2004) found that the technology spillover effect of foreign capital on China is mainly realized through the channel of human capital, which acts on the soft technology part with labor as the carrier, while the capital of the other channel of technology spillover is not smooth. On the whole, this trend weakens the ability of independent technology development in China and forms the external dependence of technology. There are many literatures about the technology spillover effect, but Meng Liang et al. (2004) found in the empirical study of the technology spillover effect of foreign direct investment that the research results of foreign scholars for different countries are very different, even for the same country, different scholars have drawn completely different conclusions.
However, up to now, most literatures using panel data (especially the research on enterprise panel data) support the conclusion that there is negative spillover effect or no spillover effect. (2) There are few breeding grounds for indigenous technology in China. Wang Chunfa (2 1004) made an in-depth study on the relationship between foreign direct investment and endogenous technological capabilities from four aspects: literature research, theoretical research, questionnaire survey and case analysis, and found that most of the conclusions on the relationship between foreign direct investment and technological progress in China from the perspective of mechanism were negative; FDI entering China presents obvious characteristics of "double-headed" and "poor-rooted". Foreign companies are highly dependent on the technology of the parent company, rarely participate in local technology market activities, and have very weak technical ties with local enterprises, governments and scientific research institutions. Therefore, only at this stage, foreign companies have made little contribution to the cultivation of endogenous technological capabilities in China; Moreover, due to the technological advantages enjoyed by multinational companies, China enterprises may be forced to give up their existing basic technology development capabilities and rely on the technology provided by multinational companies instead, thus forming technological dependence on them.
(3) The blockade of foreign core technologies increases domestic technological risks. Zhu Niangui (2003) started with the analysis of the nature of foreign investment in China, and pointed out that the huge technology monopoly profits in the high-tech field determine that the technology spillover effect is very limited. He also used the theory of "anti-trade-oriented foreign investment" by Japanese economist Kiyoshi Kojima and the theory of "flying geese development model" by Akamatsu to explain that the technology introduced by the host country will usually be eliminated by the investing country. In the long run, this will lead to an increase in the technological risk of relying on foreign technology and seriously weaken the technological strength of the host country.
4. Risk of FDI effect in China's regional economic development.
Wei (2002) used the time series and cross-sectional data of 1985- 1999 to make an empirical analysis of the impact of foreign investment on China's regional economy. The results show that about 90% of the difference in GDP growth rate between the eastern and western regions of China is attributed to foreign direct investment. Xu Lianzi, Xie Baohao (2003) and Xu Jianming (2004) believe that foreign capital is excessively concentrated. There are also related literatures abroad that study the problems existing in China's foreign investment, and the conclusion is unanimous that the biggest drawback of China's foreign investment is that it intensifies the regional economic differences between coastal areas and inland areas. Sun H.( 1995), Wanda Tseng and Harm Zebregs (2002) investigated the impact of FDI on the economic development of the eastern and western regions of China, and found that FDI contributed a lot to the economic growth of the eastern region, but the impact on the western region was almost negligible, thus further increasing the economic gap between the eastern and western regions of China. Sun Haishun and Joseph Chai (1998) used time series analysis and cross-departmental data to make a regression analysis of the situation in China 16 provinces. Through empirical analysis, it was found that foreign capital not only widened the economic gap between the east and the west, but also increased the regional economic gap in Guangdong Province.
5. Risks of FDI effects in other fields
(1) Underemployment. In 2002, the employment of foreign enterprises accounted for less than 65,438+00% of China's urban employment population, and foreign-related taxes accounted for about 20% of China's, reflecting the limited contribution of FDI to China's employment and taxation (Mu Hong, 2004). The limited effect of foreign capital on employment will become increasingly obvious. On the one hand, the employment goal of foreign enterprises is to reduce staff and be efficient, which is out of sync with the goal of solving a large number of domestic employment; On the other hand, the entry of foreign companies has also led to the closure of some domestic enterprises and the increase of unemployment (Yu Yongding, 2004). (2) From the capital formation effect of foreign capital, it is pointed out that foreign capital has occupied the domestic factor market, and there is a "crowding out effect" of foreign capital on domestic capital when domestic capital is abundant (Zuo Dapei, 2004). (3) In addition, the influx of foreign capital has intensified the trend of resource overdraft and environmental deterioration in China, and the entry of foreign capital into some special fields will threaten China's information security (Chen Taifeng, 2002).
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