FDI Attraction Comparison between Zhejiang Province and Jiangsu Province-浙江省和江蘇省吸引外商直接投資的比較
03-21, 2014
FDI Attraction Comparison between Zhejiang Province and Jiangsu Province
浙江省和江蘇省吸引外商直接投資的比較
Abstract
摘要
摘要
Foreign direct investment (FDI) has been one of the most significant features of China’s economic reform and opening up to the outside world. For the last two decades, China has gradually liberalized its FDI policy regime, reduced restrictions and barriers to FDI, and improved the overall investment environment. Together with its potentially huge and fast growing domestic markets, relatively well-educated and low-cost labor forces, China has become one of the most attractive destinations for FDI in the world.
外國直接投資（FDI）一直是中國經濟改革開放給外界的最顯著的特點之一。在過去的二十年中，中國已逐步放寬了外國直接投資的政策制度，減少限制和障礙，外國直接投資，并改善了整體的投資環境。連同其潛在的巨大和快速增長的國內市場，相對受過良好教育和低成本的勞動力，中國已經成為外國直接投資在世界上最有吸引力的旅游目的地之一。
Zhejiang and Jiangsu Provinces have always been the richer and developed area in China. They both lie in the Yangtze Delta, which provides superior natural conditions and pleasant climate environment. Since China’s reform and opening, relying on the advantaged position, two provinces have become one of the most vigorous areas in the FDI attraction. Carrying on the study to FDI attraction comparison of two provinces, at first, we will have overall understanding of the scale, mode, structure and impact of FDI attraction in those provinces. At second, through comparing the difference of relevant index and analyzing cause of formation, we can summarize the location advantages at FDI attraction in two provinces. This can not only offer the theoretical basis to bring out strengths which can offset weakness, and then utilizing FDI more efficiency for Zhejiang and Jiangsu provinces, but also offer certain reference meanings for other provinces and cities in attracting FDI rationally.
浙江省，江蘇省一直是中國的富裕和發達地區。他們都在長江三角洲，它提供了優越的自然條件和宜人的氣候環境。由于中國的改革開放，依靠得天獨厚的位置，兩省已成為最具活力的地區的外國直接投資的吸引力之一。經研究兩省，起初的吸引外國直接投資的比較，我們將有規模，模式，吸引外國直接投資在這些省份的結構。第二，通過比較相關指標，分析成因的差異，我們可以在吸引外國直接投資在兩省總結的區位優勢。這不僅提供了理論基礎，哪些優勢彌補弱點，然后利用外商直接投資對浙江和江蘇兩省更高的效率，同時也為其他省市在吸引外國直接投資的理性提供一定的借鑒意義。#p#分頁標題#e#
浙江省，江蘇省一直是中國的富裕和發達地區。他們都在長江三角洲，它提供了優越的自然條件和宜人的氣候環境。由于中國的改革開放，依靠得天獨厚的位置，兩省已成為最具活力的地區的外國直接投資的吸引力之一。經研究兩省，起初的吸引外國直接投資的比較，我們將有規模，模式，吸引外國直接投資在這些省份的結構。第二，通過比較相關指標，分析成因的差異，我們可以在吸引外國直接投資在兩省總結的區位優勢。這不僅提供了理論基礎，哪些優勢彌補弱點，然后利用外商直接投資對浙江和江蘇兩省更高的效率，同時也為其他省市在吸引外國直接投資的理性提供一定的借鑒意義。#p#分頁標題#e#
Chapter One
第一章
Introduction
引言
引言
1.1 Background
1.1背景
1.1.1 China’s FDI attraction after 1979
1.1.11979年以后中國的外商直接投資
1.1.11979年以后中國的外商直接投資
Ever since its reform and opening-up, the pace of China’s integration into the economic and financial globalization has been faster and faster. Now China has become the largest recipient country of foreign direct investment (FDI) among all developing nations. During 1979—2004, the actual value of foreign investment in China totaled US$562.1 billion. Yet there lies a serious imbalance as to the actual spread of FDI amongst the country’s different regions. In 2004, actual value of FDI into China was $60.63 billion, out of which 86.1% went to the eastern region, 9.5% to the central and the remaining 5.71% to the western region.
自從改革開放以來，中國進入經濟和金融全球化的步伐已經越來越快。現在，中國已經成為外國直接投資（FDI）的所有發展中國家中最大的受援國。在1979年至2004年，外商在中國投資的實際價值為5621億美元。然而，其實存在著嚴重的不平衡，以外商直接投資實際當中蔓延全國的不同地區。 2004年，外商直接投資實際值進入中國是606.3億美元，其中86.1％上升到東部地區，9.5％至中央，其余5.71％為西部地區。
自從改革開放以來，中國進入經濟和金融全球化的步伐已經越來越快。現在，中國已經成為外國直接投資（FDI）的所有發展中國家中最大的受援國。在1979年至2004年，外商在中國投資的實際價值為5621億美元。然而，其實存在著嚴重的不平衡，以外商直接投資實際當中蔓延全國的不同地區。 2004年，外商直接投資實際值進入中國是606.3億美元，其中86.1％上升到東部地區，9.5％至中央，其余5.71％為西部地區。
Since 1995 to 2004, the world’s FDI attraction increasing was mainly by the developing countries. China’s FDI attraction trend is almost the same with some developing countries and shows an increasing status. Chart 1 shows the development trend of developing countries from which we can compare the data and trend to do further analysis.
Chart 1 The trend of FDI attraction in developing countries
from 1995 to2004 (unit: billion dollars)
1.1.2 The influence of FDI in China
After the national economic plan carried our in 1979, the economy of China entered a new period for development in an all-round way. Comparing with the reform in 1980s, the reform in 1990 further promoted the SOE reform, and a large amount of the foreign direct investment flowing into becomes strong motive force of promoting the economic growth. The trans-corporation made the investment in China on a large scale since 1993. As a result, the amount of money was enlarged suddenly in foreign direct investment (FDI) that year, which indicated that the contracted value reached more than 111.4 billion dollars, and it was 27 billion dollars of actual value, nearly all one time the size of previous year. Later, the amount of actual value of FDI in China rose continuously, reached 53.5 billion dollars in 2003, exceeding U.S.A. and becoming the country absorbing the most foreign direct investments in the world. In 2004, in a situation that global economy increasing fast, the transnational direct investment stopped dropping and went upward, which helped China absorbing FDI more efficiency. The contracted value reached 153,479 million dollars while actual value reached 60,630 million dollars. In 2005, the sum of FDI had reached 605 hundred million dollars.#p#分頁標題#e#
FDI also provided many jobs for local people. From 1986 to 1990, 1991 to 1996 and 1997 to 1999, the new increase jobs provided by foreign-investment companies were 0.06 million, 3.75 million and 0.72 million separately. At the end of 2004, the numbers working in the foreign-investment companies reached 24.0 million. Moreover, FDI did large influence in China’s GDP and export value. In 2004, the proportion of actual value in total GDP was 3.68%, which provided export amount 338.6 billion dollars.
The economic growth of foreign-investment enterprise was in sound condition that the main indexes of economic growth were higher than the average level in China, these indexes such as industrial added value, industrial output, volume of export, tax revenue, etc. In the national total supply and demand, especially in the increment of national economy, the proportion of these factors continued improving. It had obviously strengthened a continual, fast and healthy development of national economy.
1.1.3 The situation of FDI in Zhejiang province
Zhejiang’s FDI attraction mainly began in1984. During the years 1984 to 2004, Zhejiang Province has held the historical opportunities of the economic globalization and accession to the WTO of China. Based on the position advantage and industry's advantage, Zhejiang devoted more efforts to FDI attraction, and had made the positive effect. The total amount of contracted value was $77.13 billion from 1984 to 2004 while actual value reached $45.05 billion. Especially in 2004, the whole province further improved quality and level of absorbing foreign capital. Zhejiang province sanctioned 3,824 foreign-investment enterprises newly in 2004, what provided total investment 28,800 million dollars, contracted value 14,561 million dollars and actual value 66.81 hundred million dollars. Foreign capital enterprises also brought lots of job opportunities in Zhejiang province, whose employment volume was up to 339,000, account for 5.22% of total employment people in cities at the end of 2004.
1.1.4 The situation of FDI in Jiangsu province
Jiangsu’s FDI attraction mainly began in 1978. Since Jiangsu introduced foreign capital for the first time in 1978, the whole province had approved about 64,615 foreign investment enterprises at the end of 2004, and the total contractual foreign capital was 187.19 billion USD while the total actual foreign capital attraction was 89.78 billion USD which got the top among Chinese provinces. And the actual value got to 12.13 billion USD. However, Jiangsu utilizing the foreign capitals contribution of the economic growth was lower than Shanghai, Guangdong and Fujian. The statistics illustrated that utilizing the foreign capitals had very obvious pulling effect in Jiangsu. The number of employees of foreign-investment enterprises in Jiangsu was up to 1,376,600 in 2004, accounted for 24.17%. However, the output benefit of the overseas-funded enterprise in Jiangsu was not very ideal, and most indexes were lower than the averages of all enterprises.#p#分頁標題#e#
1.1.5 Some evaluation about two provinces’ FDI situation
One of the favorite indicators government officials, such as Mayor Wang Mang of Suzhou, and researchers on China like to cite to showcase economic achievements is the amount of foreign direct investment (FDI) one is able to attract. By this criterion, Jiangsu province has been a huge success story. In absolute terms, Jiangsu ranks as the second largest provincial recipient of FDI (after Guangdong province). In 2005, Jiangsu received $13.18 billion in FDI, which accounted for nearly one-fifth of total FDI inflows into China. In contrast, the FDI inflows into Zhejiang only amounted to$7.1 billion in the same year. The less than stellar FDI inflows into Zhejiang prompted several research organizations—including the World Bank—to give a low score to the cities in Zhejiang on international integration.
However, as the above quote from Mayor Wang suggests, Jiangsu has consistently been outperformed by Zhejiang on those dimensions that actually matter—per capita income and economic growth. Zhejiang is rich largely through a catch-up process; Jiangsu is rich today but it has always been rich. In 1980, Jiangsu already had the second largest GDP in the country (after Sichuan) and it produced almost twice as much as Zhejiang did. In per capita income terms, Jiangsu had occupied exactly the same spot in 1980 as it did in 2004—number three in the country (not including Beijing, Shanghai, and Tianjin, which do not have an agricultural sector). In contrast, Zhejiang ranked seventh in the country in 1980 but it ranked first by 2004 (again not counting Beijing, Shanghai, and Tianjin).
1.2 Research Objective
The neighbor provinces are similar in many aspects such as region, weather, industry structure and others, but they have numerous differences in the areas of FDI. The total amounts of FDI capital, contracted value, as well as actual value are all higher in Jiangsu than in Zhejiang. In my article, I plan to find out the differences and discuss the reasons. So my central objectives are the follows.
(1) To generalize some important factors that affect FDI attraction.
(2) To summarize the differences of FDI attraction through comparing each index.
1.3 Central Research Question
The central question of my article is that why there is a difference in FDI attraction between Zhejiang and Jiangsu provinces. In order to research this question, I need to study several details as follows:
(1) What is the status quo and characteristic of FDI attraction in Zhejiang and Jiangsu provinces?
(2) What are the differences in each index of FDI attraction between these two provinces, such as scale, domain structure, industrial structure, economic effect, etc?#p#分頁標題#e#
(3) Through the comparison of several indexes above, what’s the conclusion about the reasons for difference in FDI attraction in two provinces?
1.4 Limitation
This paper has analyzed the recent situation of FDI attraction in Zhejiang and Jiangsu provinces, and then provides some recommendations. But as my knowledge and resources are limited, I can not do a deeper research. In addition, because of the limitation in time and resource, I can not get too much primary data so most of data I adopted are the secondary data.
Chapter Two
Methodology
2.1 Introduction
This paper discusses my recent understanding of the methods and constraints, interpretable results with regard to my basic prediction of FDI attraction. As the discussion going on, some alternative proposals are also under consideration as complements to the currently planned approach. I choose the methodology suitable for my article which is listed below to analysis the current situation and show my ideas.
2.2 Research Design
2.2.1 Research Philosophy: Realism
Realism is based on the belief that a reality exists independent of human thoughts and beliefs. It is indicated that there are large-scale social forces and processes that affect people without their necessarily being aware of the existence of such influences on their interpretations and behaviors (Mark Saunders, 2003). Different benefit of FDI attraction in Zhejiang and Jiangsu has existed. This is an economic phenomenon that is independent of human thoughts and beliefs, and this reality existence affect development of trade economy without human necessarily being aware of the existence of such influences. In this way, realism, as applied to the study of economic phenomenon, recognizes the importance of understanding economic phenomenon.
2.2.2 Research Approaches: Inductive
The inductive approach is the approach that we would collect data and develop theory as a result of our data analysis (Mark Saunders, 2003). It emphasizes on a close understanding of the research context, the collection of qualitative data and a more flexible structure to permit changes of research emphasis as the research progresses. The FDI attraction difference is an existent phenomenon. My task would be to collect large numbers of datum about the influence factor and critical review to develop a theory.
2.2.3 Research Strategic: Grounded Theory
Grounded theory (Glaser and Strauss, 1967) is often thought of as the best example of the inductive approach, although this conclusion would be too simplistic. In grounded theory, data collection starts without the formation of an initial theoretical framework. Theory is developed from data generated by a series of observations. These data lead to the generation of predictions that are then tested in further observations which may confirm (Hussey and Hussey 1997). In this research strategy, I have considerable ability to analyze the performances of FDI attraction in these two provinces and obtain their differences. Through series of observations, data of each aspect will be collected, and then draw the theories out.#p#分頁標題#e#
2.2.4 Time Horizons: Longitudinal Studies
The effect of FDI attraction cannot be produced by one or two years, and it must be a long period. Maybe it was established since Chinese government carrying out open-up and reform policy. My study is focus on the formation of FDI attraction in Zhejiang and Jiangsu provinces, I should do research on the established processes, present impacts to economy and the future development. So my time horizons would be a longitudinal case study.
2.2.5 Data collection methods: Secondary data
Because of the time limitation, I can not collect all the available data by myself. For my research questions and objectives, the main advantage of using secondary data is the enormous saving in resources, in particular my time and money. There are many government organizations setting up for FDI in China, so it is not very difficult to collect data from these organizations and the websites they hold.
2.2.6 Feasibility and Research Limitations
My methods, procedures, techniques and protocol are feasible, adequate and appropriate. But there are limitations: Firstly, realism may not be achieved completely because it is difficult for me to find all real data and necessary information. Secondly, secondary data is collected by others, and different articles may have different purposes. So my data may be not accurate.
2.2.7 Ethical Implications and Issues
Ethical implications will emerge as I plan my research, seek access to organizations and to individuals, collect, analysis and report my data. The appropriateness or acceptability of my behavior as researcher will be affected by broader social norms of hehaviour (Wells, 1994; Zikmund, 2000). In the context of research, ethics refers to the appropriateness of my behaviour in relation to the rights of those who become the subject of my work. I should not attempt to apply any pressure on others to grant access. This is unlikely to be the case where I am approaching a member of an organisation’s management to request access. Also, I should not intrude on people’s privacy who are not willing to provide me useful data.
2.3 Data Collection
Most of the data in the article is collected as the secondary data. The secondary data include both raw data and published summaries. My collections include statistic websites about Zhejiang and Jiangsu provinces which contain a wealth of data. Government departments undertake surveys and publish official statistics covering social, demographic and economic topics.
However, there is a very important primary data collection. With the permission of Zhejiang Statistic Department, I get survey evidence on the FDI policy stances of these two provinces. It reports the responses from 400 local officials of two cities—Zhangjiagang of Jiangsu and Wenzhou of Zhejiang—on their policy stances on FDI. This survey asked 200 officials in each of these two cities to rank FIEs on an 11- point scale (0-10) in terms of their contributions to China’s economic development.#p#分頁標題#e#
All of the data will be listed in chapter four.
Chapter Three
Literature Review
3.1 Introduction
Academic research in the past 20 or 30 years on the foreign trade investment attraction has been focused on: 1. increased analysis of location factors in international FDI theory to explain the influence of geographical locations on the choice of FDI recipient countries; 2. investigation of investors to find out the decision-making process in their FDI locations; and 3. quantitative indexes to determine the differences of FDI attraction in different areas.
3.2 Location theories
Most of theories of the FDI direction concentrate on the traditional comparative advantage, for instance market capacity, labor cost, traffic, communication cost, relative engineering level, etc(Vernon，1966). John H. Dunning (1993) put forward a famous “OLI” theory. He argued that the former theories can only explain some aspects of FDI and can not combine the invest theory and trade theory.
3.2.1“OLI” theory
“OLI” theory indicated if companies plan to do international investment, they must concentrate on the advantages of three aspects: Ownership advantage, location advantage and internalization advantage.
(1) Ownership advantage
It refers that the enterprise has some kind of property which is owned by itself and is not obtained by foreign firms. For instance, the enterprise has superiors on production technology, scale economy, organization, management and so on. The ownership advantage is in demand when do foreign investment activity.
(2) Location advantage
The location chosen may be influenced by production element and market geographic distribution, production element and transportation cost, investment environment and so on. The essential endowment refers to the host country’s natural resource, human resources, market capacity and so on. The location superiority mainly concentrates on the following aspects: the host country market’s geographic distribution, the production element’s cost and quality, transportation cost, infrastructure, the scope and degree of government intervene, the different financial system in each country, the difference degree of domestic and foreign market, as well as the psychic distance which as a result of history, culture, custom, business practice. The enterprise will be influenced by these factors inevitably when engaging international production.
(3) Internalization advantage
Because the factors of competition barrier, fixed price difficulty, information asymmetry create the incompletely competition between semi-finished product and final product, the enterprise prefers to choose foreign investment in order to ensure its ownership advantages. The obtained benefit through internal transfer is larger than market transaction. The enterprise’s motivation of superiority interior is to avoid disadvantage influence of firm’s operation by external market’s incompleteness, and keep the monopoly status of technology innovation.#p#分頁標題#e#
Dunning’s three essential factors showed that when the firm carries on the foreign investment, the ownership advantage is the foundation, and the internalization advantage is the carrier, and the position advantage is sufficient condition. When the superiority of these three factors put into full play and affects each other, the firm’s trans-national investment will have the biggest overall benefit.
This theory can help me understanding the factors what influence FDI attraction. But the “OLI” theory based on the FDI investors while my research concentrate on host country. Investors and host countries have different purposes in FDI. Obviously, investors’ purpose of investment is to earn money or promote influence. But the Chinese government’s purpose of FDI attraction is economic promotion for the whole nation. Especially, the government of each province will not permit the investment project which is benefit for investor but not benefit for itself. So the “OLI” theory suits for my article by certain degree but not completely.
3.2.2 Pecuniary externalities and knowledge spillover theories
The ‘new’ location theory of FDI emphasizes ‘pecuniary’ externalities associated with demand and supply linkages, such as the possibility to use joint networks of suppliers and distributions (Krugman, 1991; Venables, 1993). On one hand, economies, characterized by high transportation costs, limited manufacturing production and weak economies of scale have a dispersed manufacturing sector. On the other hand, low transportation costs, coupled with a large manufacturing sector and economies of scale, foster concentration of production.
Another theory can be derived from the new growth theory (Romer, 1986; Lucas, 1988). It is indicated that FDI can generate “spillover effect”, accelerating the transmission speed of advanced science technology, knowledge and human resource through out the world. Looking from the efficiency of using world’s overall resources, production transferred from developed countries to less developed countries, in order to save great amount resources of developed countries, favoring development activity of new products. Looking from the less developed host countries, the influence to economic growth when numerous FDI flows into is not only accumulating capital, but also studying and absorbing advanced technology from developed countries. Less developed countries’ economy takes advantage of late-development advantage to form an “overtake effect”. Others argued that knowledge-enhancing activities can only partly be appropriated by firms, implying that an externality is created and diffused to other firms, thereby reducing their costs (Griliches, 1979).
According to above theories, pecuniary externalities and knowledge spillovers gain in importance for firms’ competitiveness, and they will increasingly influence firms’ FDI attraction locational decisions. I can absorb some details from the location theories to do my research. But it is not necessary to refer to every point.#p#分頁標題#e#
3.2.3 Agglomeration Economies
An important question for host country’s policy makers is what the host government can do to attract FDI. Trade theory argues that the location choices by investing firms are influenced by the classical factors of comparative advantages specific to the country: market size, low wages, skilled labor force, and infrastructure. Others suggest that the investment location choices be explained by agglomeration economies (e.g. positive externalities by co-locating to others).
Agglomeration economies can be a powerful force for attracting large numbers of people to given location. While the natural resource initially attracts businesses and households to the location, this original group then becomes the factor that attracts other businesses and households to that location. As the location grows in size, business costs fall and the location’s attractiveness as a potential spot for other businesses and households rises, and more people and businesses move in. Although rising congestion eventually chokes off the inflow of people, agglomeration economies can be the spark that ignites the development of a city (Satyajit Chatterjee, 2003).
The forms of clusters are around importing and exporting, where, for example, these items involve transportation costs, and then locating in close proximity reduces costs. Many older clusters were formed based on this principle. For example, Detroit car manufacturing was base in the proximity to US steel mills plus the availability of cheap electricity. Cluster also can form around proximity to information. When companies deal in the same type of knowledge, they can maximize their access to that knowledge base by locating in the same city. Despite technological advances, major financial services industries must therefore still remain concentrated in only a few localities (Patrick J.Mckenna, 2002).
These theories help me to understand the reasons of FDI attraction for multi-national enterprises. The main purpose of foreign company investment is high income but low cost. So it is important for enterprises to consider transportation, supplier, distributor, technological cost, etc. When dealing with my article, I should stand on the position of host government instead of investing enterprises. The items of which foreign company wants to reduce the cost should be considered when governments formulate policies for FDI in order to attract more foreign investment. Also, different areas hold advantages in different field which causes foreign firms choosing different provinces. This is what I should compare within the two provinces.
3.3 Empirical research review
3.3.1Foreign researches
Recent research proposes that interactions between economies of scale and transportation costs facilitate the concentration of manufacturing activities in a few large markets (Krugman, 1991). The investigation of American firms by Krugman (1991) indicated that economies of scale encourage firms to choose only a few locations for production, while the presence of transportation costs forces them to locate in large markets. Redding and Venables (2000) use a model of intermediate goods (as the agglomerating factor) together with income and number of establishments to analyze cross-sectional data on one-hundred-and-three countries. They found out that cost and demand linkages create strong interdependence between firms through input-output structures, which will leads to spatial industrial concentrations. More over, empirical studies confirm that foreign firms are drawn to locations with good market accessibility (Friedman et al. 1992; Gong 1995; Decereux and Griffith 1998).#p#分頁標題#e#
Brian J. Aitken, Ann E. Harrison (1999) using panel data on Venezuelan plants argued that governments often promote inward foreign investment to encourage technology "spillovers" from foreign to domestic firms and tested for spillovers from joint ventures to plants with no foreign investment. As a result, they argued that FDI did weak contribution to host countries’ technology spillover. Low-income countries absorbing foreign capital can not narrow down the distance from developed countries. The research from Robert J. Barro (1997) and Borensztein, Gregorio and Lee (1998) indicated that FDI was an important tool of technology transformation, which can help the host country to achieve the development of endogenous economy. The economic improvement of developing countries relies on the fixed cost of attracting technology, while its size depends on the FDI proportion in total capital. Therefore, FDI will influence the long-term economic creation, and the contribution rate of FDI is higher than domestic investment. V. N. Balasubramanyam and M. Salisu (2000) examined the FDI effect under the different trade policy of economic growth in developing countries. Mello (2002) established an endogenous economy growth model, in order to examine FDI influence to capital accumulation, output and total factor productivity. Salvador Barrios, Holger Gorg and Eric Strobl (2005) researched the extrude effect and positive marketing spillover effect when FDI did competition with domestic companies.
According to my review of foreign researches about FDI, lots of them concentrate on the influence to economic growth, and the way of entering foreign market. They are just some aspects of FDI researches. And they paid attention to the reasons. But my article should concentrate on current situation, and combine several aspects, using lots of data to analysis.
3.3.2FDI researches in China
Due to the growing geographical imbalance, choice of FDI destination locations in China has been the hot topic of academic research, a major area of which has been to examine the determinants leading to the choice of FDI locations in the country by relying on the basic principles of modern geographical location theory and by using all kinds of econometric tools, such as the analysis done by Jun Sun (2004) using the data from 1978 to 2002. Through the empirical analysis, he found that local preferential policy, industrial structure, opening level and standard of marketization are the most important causes for the foreign capital distributing embalance. Houkai Wei and Feican He (2002) researched on the same by further analyzing the relationships between the choice of locations and different industry groups, the methodology of entry, differences in economic development stages in China and the different country origins of FDI. Zhenghua Hu and Shengbin Fu (2003) using factorial analysis with the research sample of 30 provinces (except Xizang and Taiwan) also found that market scale and marketization level were the main reasons to FDI location in China at the present stage. Further more, Changchun Li (2004) analyzed the investment environment of 30 areas in China at 2002, and found out FDI location was determined by the degree of local export-oriented economy, the development level of utility technology and the condition of community facility.#p#分頁標題#e#
These researches can help me understand the factors what influence FDI attraction. Though different variables and data years were used in the above researches, the quantitative methodology remained the same. The main purpose of their research was to try to find out what factors, and to how large a degree, influenced the inflow of FDI into China or from which country, i.e., the relationship between FDI and certain determining variables (determinants). Further, some researches had chosen a few factors so that the sample data was not enough to influence the scientificalness of research result. In my article, I will choose the most useful and abundant data in each index in order to ensure the availability of the comparison results.
Resent years, some authors concern the relationship between FDI and Chinese economic growth. X. Liu and C. Wang (2003) researched the influence from FDI to total factors productivity, and found out that FDI promoted the spread of advanced technology in China. Jun Hua, Linde Zhuang (2001) and Xiaoqi He (2005) argued foreign capital did not have deep influence to economic growth in our countries. Moreover, Tianding Zhang (2004) and Lei Lu (2005) thought that FDI and GDP increasing have a long-term steady balanced relationship. Thus, FDI has played a positive promoter action to domestic capital stock, labor input, industrial structure optimization and economic growth.
Reviewing above researches, there are several general problems. Lots of studies only considered the relationship between FDI and GDP, and many existing studies just did one-way examination of their relationships. But they ignored the real effect which influences the economic growth. More over, some model examining results were too general so that they were lacking of actual explanatory ability.
Based on the domestic research, I realized the current actual FDI environment situation in China, and that in each province. Furthermore, practical data can be collected from domestic literature. But few literatures refer to the differences of two similar provinces. These provinces must have some deep reasons what cause one province less effective in FDI attraction than another. These literatures told the factors influencing the big environment but not mentioned small areas. This is what I should do.
3.4 Model specification and variables
In addition, the domestic researches on choosing FDI position mainly concentrate on provincial data as the unit, using the method to examine the real example, investigating the choice in eastern coastal area and Midwest regions of the foreign capitals after Chinese Reform and Opening Up, and then probing into various factors of influencing this kind of choice. For example, Leonard K. Cheng and Yum K. Kwan (1999), using Chinese data, analyze and further obtain the result of enormous market, good infrastructure, economic policy for the special zones have enormous attractive of direct foreign investments. In the factor analysis of China FDI distribution choosing, Sun Jun (2002) considered the impact on FDI of preferential policy in an area, level of openness and marketization degree, and then found above factors all have positive influence to FDI attraction.#p#分頁標題#e#
In order to test the presence of effects, the following model is constructed by Wu Haiying (2004):
FDIi =α0+αXi+εi
where i =1,…,31 (31provinces total in China); FDIi is the amount of FDI inflow into the provinces in a given period of time; Xi denotes a set of independent variables that vary across provinces and over time; and ε denotes stochastic disturbance. The variables used in this analysis are defined below.
FDI: A dependent variable referring to the share of FDI inflow into various regions, its unit being 100 million yuan(RMB) at the average annual exchange rate with US dollars listed by the Ministry of Commerce of China.
The independent variables are listed below:
GDP: Gross Domestic Product, the total amount of production and services of a certain region in a given year, and a substitutive variable of the market volume in this study, its unit being billions of RMB. Theoretically, its expected impact should be positive.
LOCA: A dummy variable with the eastern region=3, the central=2, and the western=1. Geographically, Guangxi Province belongs to the eastern coastal region and Inner Mongolia the central, but for the Great Development of Western China, both Guangxi and Inner Mongolia are considered western province and region. It should have a positive impact on FDI inflows.
STA: The state-owned industrial output, or ratio of the state-owned and state-held majority industrial enterprises’ output to the gross industrial output. Reflecting the degree of maturity of China’s market economy, it should be negatively related to FDI inflows. Its unit is the percentage (%).
TER: Ratio of the value-added of the tertiary in GDP, mainly indicating the stage of development of finance, transportation, information services, etc. Its expected impact should be positive. Its unit is in percentage.
CITY: Urbanization level, representing the ratio of cities with an urban population of 500,000 out of the total number of cities in a given region. Theoretically, this variable should be positive on FDI, its unit being in percentage.
POLI: A dummy variable. With reference to Sylvie Démurger’s(2002) approach, my article measures and tests favorable policy index based on the types of the special economic zones established by each province and the open-door policy. Representing preferential policies and it should be positively related to FDI inflows.
WAGE: A dummy variable. It is that if the labor cost of the region is higher than that of the national average, or it will be null. In theory, it is inversed to FDI.
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LI: This variable refers to the proportion of light industry above a certain size relative to the gross industrial output value. With the priority change from heavy industry to the compensatory development of light industry since China’s reform and opening-up, FDI has been affected by the regional distribution of light industry locations in China. Its unit is in percentage.
FTD: Foreign trade dependency degree is equal to the ratio of total imports and exports in GDP. Reflecting the openness of the economic development of the region concerned, its impact should be positive theoretically. Its unit is in percentage.
FI: The proportion of the amount of foreign enterprises’ imports out of the total local imports and exports, which reveal the degree to which local governments control the imports by foreign enterprises. It should be positively related to FDI inflows, its unit being the percentage.
HC: Illiteracy rate of the population at or over the age of 15 in the region concerned, which represents the accumulation of the local human resource. It should be theoretically negative related on FDI inflows, its unit being the percentage.
These indexes are the factors influencing foreign investors in choosing the location. Each index has its special implication for economic development. Having these indexes, I can find the differences in FDI attraction when comparing the data, the percentage, positive or negative effect, etc. But these indexes Wu Haiying (2004) used in explaining FDI environment in Western China do not suit for my article as a whole. Choosing appropriate indexes suitable for analyzing the different FDI attraction in the two provinces is what I should concentrate on. In my article, I will choose the indexes of GDP, POLI, LI, FTD and FI to do comparison, in order to discuss their differences about FDI attraction. Since not all of the data can be collected, I won’t use this formula for my findings and discussions. Other simpler formula will be utilized below.
Chapter Four
Findings & Discussions
4.1 Findings
4.1.1 Introduction of Zhejiang and Jiangsu Province
Zhejiang province and Jiangsu province both locate in the east China, near the East China Sea (see map 1). The total area of land is 105,400sq.km in Zhejiang and 102,600sq.km in Jiangsu, which seems that the difference is narrow. Besides, the cities in them constitute the Yangtze River Delta together with the city Shanghai who is one of the most development areas in China. They belong to the China open coastal city belt and along the Yangtze River industry crowded city belt so that they have advantageous location with the juncture of river and sea and the center of north and south. Because of their openness, they become the very important windows for China walking towards the world. Moreover, the Yangtze River Delta is one of the world’s top six metropolises belts, and one of China’s most developed areas, whose development has pivotal function to the whole countries development.#p#分頁標題#e#
Map 1 The location of cities in Zhejiang province and Jiangsu province
Resource: “Market Profiles on Chinese Cities and Provinces”, 2004, Hong Kong Trade Development Council
In addition, Zhejiang and Jiangsu province have their special culture characteristics. On the one hand, the two provinces contain the Chesterfieldian culture and the culture full of passion, in addition to the modern foreign culture. Three kinds of cultures with bright characteristics all have certain influence in the nation and even in the world. So the connection with these three cultures has composed the Yangtze River Delta1 culture characteristic which promotes the local economic life, and enhances people’s moral character, morality, esthetic sentiment and culture self-restraint.
On the other hand, Zhejiang and Jiangsu province have both national culture and opening culture with linking the eastern culture and western culture and holding overseas culture. All of these characteristics get up the role of windows and bridges for introducing western outstanding culture to our country and spreading national culture. Especially the Wenzhou city in Zhejiang province has nearly formed the idea of “the Wenzhou merchant” which is approved in the whole nation and even the world. The economist Funai Dong pointed out that there are four reasons should be mentioned when Wenzhou economy continues to maintain strong vitality and vigour, and continuously in the leading position of the whole nation. One is that the Wenzhou people have very strong desire to be rich; Another is that they have the spirit of bearing hardship and standing hard work; Three is that they have the sprite of unceasingly studying and innovating; And four is that they dare to take risk.
In their developing process, Zhejiang and Jiangsu province enjoy fine weather and favourable geographical position as well as excellent people. Because of this, two
provinces’ economic development manifested the advantageous superiority, and the market degree was quite leading comparing with the other part of the country. Moreover, to a certain degree, the policy of industrial structure adjustment helped them to avoid direct shock which was brought by industry entering openness. So the whole economy can have higher receptivity when it meets opening up.
4.1.2 Comparison in general
(1) GDP
GDP is an important index when comparing the degree of economic development. In the year 2004, Zhejiang’s total GDP got 1124.3 billion yuan which ranked the forth comparing with the whole nation. And the amount of Jiangsu’s GDP ranked the third in the nation which got 1551.2 billion yuan. However, we generally reflect the market demand factor by local GDP per capital. Comparing Zhejiang and Jiangsu’s per capital GDP, we can get the following chart (Chart 2). Which we can see from the chart is that per capital GDP had a little difference between two provinces in the former years, while the distance became a little large in the later years. From the year1993 to 2004, per capital GDP was rising from 4308yuan to 20600yuan in Jiangsu province and from 4431yuan to 28800yuan in Zhejiang province. The percentage of per capital GDP increasing in Zhejiang is a little faster than Jiangsu.#p#分頁標題#e#
Data sources: 2001, 2005 “Jiangsu statistical yearbook”; 2001, 2005 “Zhejiang statistical yearbook”; Jiangsu statistical web; Zhejiang statistical web.
(2) FDI Attraction
More than 20 years reform and opening policy, Jiangsu’s opening economy obtained considerable development, and the foreign investment enterprises grew one after another, presenting vigorous development. Entering the 90th last century, along with the global economic integration acceleration, Jiangsu province complied with the world economics development, and held the good opportunity of international capital transfer. Then, the opening area unceasingly expanded, and the opening step speeded up day by day. Particularly, under the background of WTO, Jiangsu has made phenomenal progress in FDI attraction in the short less then 5 years time, and the total quantity is equal to the historical total amount. Since Jiangsu introduced foreign capital for the first time in 1978, the whole province had approved about 64,615 foreign investment enterprises at the end of 2004, and the total contractual foreign capital was 187.19 billion USD while the total actual foreign capital attraction was 89.78 billion USD which got the top among Chinese provinces. Further more, 230 companies in the Global Top 500 companies had invested in Jiangsu for more than 650 projects. Among these
projects, there were 188 large items that the total investment capital in each of them was more than 100 million dollars. Jiangsu attracted nearly one fifth of Chinese total foreign capital with the land less than one percent in China.
Zhejiang is also located at the Yangtze River delta like Jiangsu. But if considering Shanghai as the economic centre of Yangtze River delta, Hangzhou is farther than Suzhou who is the political and cultural centre city in Jiangsu. Another factor which can not be ignored is that because of historical reason, the cities in Jiangsu have higher geographical culture integration with Shanghai than Zhejiang cities. It takes advantage of opportunity to invest in peripheral cities. Moreover, at the early years Jiangsu introduced Singapore’s industrial park superior than others in the mechanism and management, and provided superiority for Jiangsu. And then, the foreign-owned companies entering Jiangsu early or late had formed industrial chain and accumulative effect, making Jiangsu to have a positive cycle in FDI attraction. Looking from the above analysis, we can see that the synthesized competitive power of FDI attraction in Zhejiang and Jiangsu provinces exists great differences. From the beginning in 1984 to the end of 2004, the total amount of contracted project of foreign direct investment was 32,710 while the total amount of contracted value of FDI was 77.14 billion USD. The total actual value of FDI in these years was 45.05 billion USD.#p#分頁標題#e#
Table 1 listed the actual value in FDI of both provinces from 1993 to 2004, and the proportion comparing with the whole country corresponding period. Looking from table 1, we can see that Jiangsu was obviously higher than Zhejiang in actual value of FDI no matter in relative scale or absolute scale.
The investment domain of the secondary industry has been widely, and the investment of infrastructure and basic industries grew rapidly, simultaneously, the investment of tertiary industry also increased unceasingly. But two provinces have differences in their own traditional superiority industry; FDI also has differences in the industry which concentrated on manufacturing industries. The FDI in Zhejiang province mainly concentrated on its superiority industries. In the manufacturing industry ranking of FDI in 2004, Zhejiang’s textile manufacturing industry and the garment and related products are situated ahead, besides, the sum of the investment proportion occupied 15.3% of the total. Meanwhile, Zhejiang’s other superiority industries also become more centralized industries, such as equipment in common use industry, telecommunication equipment, computer and electric equipment manufacturing industry, raw chemical materials and chemical products industry, leather and fur product industry and ordinary machine manufacturing industry (see chart 3).
The FDI in Jiangsu province mainly concentrates on electronic and telecommunication equipment manufacturing industry. In the year 2004, the industry increased value of telecommunication equipment, computer and electric equipment manufacturing industry was 23.6% comparing with the total FDI, higher than the second rank of raw chemical materials and chemical products industry nearly 15 percent. The industries listing in the second level are raw chemical materials and chemical products industry, electric machinery and equipment manufacturing industry, special equipment industry, textile industry and equipment in common use industry. The sum of industry added value about these 5 industries was more than 33% in the total FDI (see chart 3 ).
Data resource: 2005 “Zhejiang statistic yearbook”; 2005 “Jiangsu statistic yearbook”
The electronic industry is not only technology-intensive industry but also labour-intensive. Nowadays, multinational corporations prefer to put the electronic industry’s development and sell ion developed countries, while put making and assemble link on developing countries who have large amount of inexpensive labour force. Because of the inexpensive labor force and land price in Jiangsu, and leaning on Shanghai, it became the ideal investment place. At the same time, the FDI in Jiangsu mainly concentrating on electronic industry has the close relation with entering large amount of FIEs, like Phillips, Fujitsu, Toshiba, Sharp, Ming Ji, Erosion, Samson and so on. Only the Dutch Phillips company invested in 5 enterprises. But these large enterprises almost centralized in several regions. For instance, the southern Jiangsu area which has superior position condition, infrastructure and economic technical basis obtained astonishing achievement in attracting foreign firms and capitals. The cities Suzhou, Wuxi did well in industry development. In comparison, middle and northern Jiangsu introduced FDI weakly and had big disparity with southern Jiangsu.#p#分頁標題#e#
(2) FDI Sources
The FDI sources structures were quite similar in Jiangsu and Zhejiang province. From 2000 to 2004, Hong Kong, Taiwan, USA and Japan occupied four seats of the first five FDI source countries and areas in both provinces over the years. Considering both Jiangsu and Zhejiang provinces, Hong Kong had the highest FDI proportion over the years, while Taiwan, USA and Japan have some fluctuation in the ratings. Additionally, Korea held a position in Jiangsu’s first five FDI source areas, and Virgin Island in Zhejiang. The centralization degrees of FDI sources were both quite high in these two provinces. In each province, the amount of FDI in the first five FDI source countries and areas was beyond 50% from the amount of FDI in the whole province. However, Zhejiang’s centralization degree of FDI sources areas was higher than Jiangsu. The distribution of FDI attraction by the first five countries or regions in 2004 are drawn as follows (see chart 4)
Data resource: 2005 “Zhejiang statistic yearbook”; 2005 “Jiangsu statistic yearbook”
4.1.4 The mode of FDI attraction
Foreign investment companies usually divided into Chinese-foreign joint venture, cooperative enterprise and foreign enterprise. Because of the earliest opening policy that most of the foreign companies entering China should use the way of joint venture, the state-owned companies with strong capital power and low labour cost became the first choice for FDI. Though there are changes in the proportion of FDI mode, the joint venture enterprises always attract much. Chart 5 shows the FDI capital of joint venture enterprises in Zhejiang province and Jiangsu province, from which we can see that the foreign capital attraction in Zhejiang is only one-third or one-fourth of capital attraction in Jiangsu.
Since last century, the proportion of foreign enterprise comparing with the total foreign investment companies in these two provinces all presented upward. In 2000, this index was more than 50% in both provinces. Comparing with Zhejiang, Jiangsu’s proportion of foreign enterprises in total was higher, which reached 71.5% in 2004. The changes in the mode of FDI can be seen from the following chart 6 about Jiangsu and chart 7 about Zhejiang.
Since last century, the proportion of foreign enterprise comparing with the total foreign investment companies in these two provinces all presented upward. In 2000, this index was more than 50% in both provinces. Comparing with Zhejiang, Jiangsu’s proportion of foreign enterprises in total was higher, which reached 71.5% in 2004. The changes in the mode of FDI can be seen from the following chart 6 about Jiangsu and chart 7 about Zhejiang.
4.1.5 FDI Dependency
In the 1990s, there were some substantial differences in the FDI patterns between the two provinces. In fact, Jiangsu depended far more heavily on FDI financing than Zhejiang, despite the fact that their initial FDI dependency was quite similar. On average, in the second half of the 1980s, both provinces drew very little FDI, as measured by the proportion of FDI to the total fixed asset investments. In Jiangsu, the ratio was only 0.63 percent, about the same as the ratio in Zhejiang (0.65 percent). In the first half of the 1990s, as China became more open to FDI, this ratio rose in both provinces, but much faster in Jiangsu. On average, FDI accounted for 13.6 percent of fixed asset investments in Jiangsu, which was more than twice the level in Zhejiang during the same period (5.7 percent). These contrasts are shown in Table 6. Because of the heavily dependency on FDI financing, it is obviously that Jiangsu depended on the key technology overseas seriously which discouraged Chinese to contact the core technology.#p#分頁標題#e#
Notes: a: Non-state sector firms refer to collective firms, FIEs and domestic private firms. b: The denominator does not include fixed asset investments made by FIEs. c: Gross profit margins refer to profits divided by sales revenue.
4.1.6 FDI policy regime comparison
Another comparison we can rule out is the FDI policy regime. The two provinces were remarkably similar: they were both open to and both actively promoted FDI. This can be demonstrated on two dimensions. First, both opened to FDI and foreign trade very early on. They were among the second wave of provinces—after Guangdong and Fujian—to be granted enhanced authority for FDI approval and export policies. In 1984, the central government designated fourteen coastal cities as “open” cities. Among these fourteen cities, four were in these two provinces, Lianyungang and Nantong of Jiangsu and Wenzhou and Ningbo of Zhejiang. In 1988, the central government initiated another round of economic openings and designated a large geographic area of Jiangsu and Zhejiang as an “Economic Open Zone.” In both provinces, Economic Open Zones covered a large area of land and a high proportion of the population and economy, as indicated in Table 7. However, Zhejiang’s government encourages the development of private enterprises, and the finance lack of economic construction is largely supplemented by private finance. Meanwhile, Jiangsu encourages large enterprises developing with foreign-investment. It leads to the appearance that Jiangsu attracted much more technical talented person with high quality than Zhejiang.
We also have survey evidence on the FDI policy stances of these two provinces (drawing from the same FDI survey cited before). Table 7 reports the survey responses of 400 local officials from two cities—Zhangjiagang of Jiangsu and Wenzhou of Zhejiang—on their policy stances on FDI. This survey asked 200 officials in each of these two cities to rank FIEs on an 11- point scale (0-10) in terms of their contributions to China’s economic development. The survey question is: Please rank the FIEs’ contributions to China’s economic development on a 0-10 scale (0 indicates no contributions and 10 indicate the most important contribution). The responses in the survey suggest no significant attitudinal differences between Jiangsu and Zhejiang. About 28 percent of officials in Zhangjiagang of Jiangsu gave FIEs a score of 8 or above, compared with 27.6 percent of the officials in Wenzhou of Zhejiang. Responses to two other questions in the survey indicate a similarly liberal view of FDI. One asked the respondents whether they would agree that FIEs were an integral component of the Chinese economy. In Jiangsu, 88 percent of officials answered in the affirmative; in Zhejiang, 89 percent did. Another question asked respondents if they wished to preserve policy incentives for FIEs. To this question, a higher proportion of officials in Jiangsu answered affirmatively than in Zhejiang (56 percent vis-à-vis 47 percent), but the magnitude of this difference is not substantial.#p#分頁標題#e#
Sources: Basic economic statistics are mainly from (State Statistical Bureau). Economic and social data are based on (State Statistical Bureau 2000) and (National Bureau of Statistics of China 2005).
4.1.7 Conclusion
Though the neighbor provinces Zhejiang and Jiangsu have something the same in geography and culture, there are differences in each index about FDI attraction.
(1) Per capital GDP in Zhejiang is more than Jiangsu, but it is obviously that the FDI attraction in Zhejiang falls behind in the amount of foreign capitals and enterprises. We can also realize that the relativity of FDI and GDP in Zhejiang is lower than in Jiangsu. Because of Zhejiang’s policy regime for FDI attraction, there are also some shortages about industry which will be discussed next paragraph.
(2) Jiangsu did well in the total amount of foreign capital attraction, but the ratio of actual value is lower than Zhejiang. From the analysis of region structure and industry structure, we can see that Jiangsu’s FDI distribution is unbalanced. Moreover, the high ratio of dependence on foreign investment companies will lead to potential problems which will also be discussed in the following.
4.2 Discussion
On the basis of above analysis, there are obviously economic effect of FDI but also deficiencies both in Zhejiang province and Jiangsu province. I will firstly discuss the economic effect with the relation between FDI and GDP. The second step is to list their shortages in order to search a surface understanding of their differences in FDI attraction. And then, some reasons will be analyzed.
4.2.1 FDI Economic Effect
When analyzing the economic effect of FDI attraction in these provinces, the authors mainly analyzed the relation between FDI and GDP, using lag regression model and Granger test procedure. Because the FDI effect to GDP has a certain time lag, using lag regression model will depict their relativity more accurately. And using Granger test procedure can further illustrate that FDI is the rate of GDP increasing reasons.
Taking GDP as explained variable and FDI as explaining variable, we choose bivariate lag regression model in order to reduce the freedom of motion loss caused by long-term lag. After choosing natural logarithm of GDP and FDI, do OLS regression, and get the result of regression equation (data from 1992 to 2004, the unit if GDP is 0.1billion RMB and the unit of FDI is 10 thousand USD).
Jiangsu:
LnGDPt = -1.5349 +0.6810 LnFDIt +0.0982 LnFDIt-1 (1)
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T =(-1.0751) (3.2037) (0.7806)
R2 =0.9295 F =59.3088 S.E =0.1538
Zhejiang:
LnGDPt = 2.2129 +0.2285 LnFDIt +0.2999 LnFDIt-1 (2)
T =(2.7737) (2.0117) (3.1090)
R2 =0.8829 F =33.9265 S.E =0.2147
Do a further analysis of consequence between FDI and GDP, using Granger test procedure to test. For convenience, FDI and GDP use the same lag length m. Because this role is sensitive with m, we calculate it as 2 and 3 separately. The result is listed in table 8.
We can see from the table, Jiangsu utilizing the relativity of FDI and GDP is higher than Zhejiang (the judgement coefficient in equation (1) R2 =0.9295 is larger than it in equation (2) R2 =0.8829). Meanwhile, whatever m chooses 2 or 3, the rate of FDI as the reason of GDP increasing in Jiangsu is larger than in Zhejiang. As a result, the overall effect of attracting FDI in Jiangsu is superior to in Zhejiang.
4.2.2 The deficiency comparison
Without objective factors of the cost of land, electricity and water, etc, research analysis argued that the distance of Zhejiang attracting foreign capital from Shanghai and Jiangsu is mainly because of the difference in economic development mode. Shanghai and Jiangsu are walking an open system way, and making the external economy with centralizing foreign capital. Their economies have the characteristics of high starting-point, big driving-force, fast adjustment of industrial structure and enough development after-effects. Unlikely, Zhejiang is depending on the system superior advantage, walking a self-sufficient and primary accumulation way. After an investigation of Zhejiang’s economic structure, some foreign investors indicated that there are “deficiency” existing significantly when doing the cooperation. Also, the deficiency in Jiangsu seems more complex comparing with Zhejiang’s defect.
(1) Deficiency in FDI attraction behaviours
According to the general comparison, we find that Zhejiang is short of industry chain and product foundation when cooperating with foreigners, while Jiangsu is at a low success ratio of attracting FDI.
Although Zhejiang’s companies have attracted FDI with high speed, there are still many shortcomings, such as short of large conglomerate, enterprises in small scale, scattered distribution, products lacking of brand advantage and core completeness, low ability of resisting market risk, short of perfect industry chain and product for foreign companies, and so on. Because of their own older product and low technology level, lots of local enterprises put out with difficulty with the foreign joint capital, the cooperate product and the technology. At the beginning several years of the reforming and opening policy, Zhejiang province attracting foreign companies are mainly labor-intensive processing enterprises, such as spinning and weaving, shoe manufacture industry and so on. But in the new turn of foreign investment, this kind of enterprises has not occupied the superiority. In fact, FDI has changed from mainly traditional processing enterprise to mainly expanding market enterprise which has higher requirement in technology, capital and infrastructure. However, Zhejiang province does not have the superiority in this aspect.#p#分頁標題#e#
Jiangsu has the superiority in attracting more FDI than Zhejiang, however, the success ratio of attracting FDI is somewhat low. For one thing, comparing with coastal brother provinces and cities like Guangdong and Shanghai, Jiangsu has a lower success ratio of introducing foreign capital. At the end of 2004, the rate of Jiangsu actual FDI comparing with contract FDI over the years accumulation is 51.4%, which is lower than Zhejiang, even lower than the whole country’s average level for 2.7%. It is indicated that the success ratio or validity of Jiangsu attracting foreign capital is not high. For the other thing, Jiangsu attracting FDI projects are mainly labor-intensive enterprises which seems the same to Zhejiang’s enterprises in the early time. Among the new approved FDI companies over the years accumulation at the end of 2004, there were only 4861 companies whose total investment was more than 10,000,000 dollars, just reached 9.7%.
(2) Deficiency in industrial innovation ability and distribution
According to the value of export and import comparison, we can see that Zhejiang is short of enterprise technology innovation ability in a certain degree. Meanwhile, the structure comparison reflected that Jiangsu’s local distribution is extremely unbalanced.
The output value rate of new product reflects an enterprise’s technology innovation ability and development potential, what is obviously lower in Zhejiang than Jiangsu. Jiangsu takes advantage of abundant investment fund like Singapore’s industrial park, and got the new product output value rate at 10.5% in 2004 while Zhejiang only got 9.5%, lower than Jiangsu 1%. What’s more, Zhejiang lacks firms like Hisense and Haier who become valuable new acquisition participating in regional economic expansion and international competition.
Jiangsu did better in innovation than Zhejiang so that it had higher number and ratio of export. But Jiangsu’s economic development is unbalanced because of the unbalanced local distribution. The area with high opening degree has quicker economic development; meanwhile, the area with quick economic development has more FDI attraction. For instance, the southern Jiangsu area has superior position condition, infrastructure and economic technical basis, and got the first benefit from reform and opening policy, then held the opportunity of developing Pudong and international capital transferring quicker to Yangtze River region, developing opening economy rapidly. As a result, it obtained astonishing achievement in attracting foreign firms and capitals. In comparison, middle and northern Jiangsu existed distance in ideas, economic basis, internal environment and so on, which caused introducing FDI weakly and having big disparity with southern Jiangsu. In 2004, the proportion of actual using foreign capital, GDP and industry increasing value in the southern Jiangsu area development zone are 66.4%, 25.1% and 35.8%, all greatly higher than middle and northern Jiangsu areas. Comparing with Jiangsu, Zhejiang has an comparatively balanced distribution. The cities of Hangzhou, Ningbo, Wenzhou, Jiaxing all did well in FDI attraction which are located in different areas in Zhejiang.#p#分頁標題#e#
(3) Deficiency in technical problems
According to the FDI dependency analysis and some aspect of policy regime analysis, we find some problems in technology attraction. Zhejiang’s main problem is short of technical talented person with high quality, while Jiangsu’s problem is that the key technology depends on overseas seriously.
The talented person especially the high quality talented person is the foundation of speeding up the internationalization. The very important standard of Multinational Corporation choosing investment region and merger partner is the human resource condition. With no doubt, sufficient human resources may combine with international capital and advanced technology effectively, in order to reduce “study” time and enhance input-output efficiency. According to the data from the province and cities’ large and middle scale firms in 2000, the proportion of technical development people comparing with jobholders in Jiangsu and Zhejiang is 5.0% and 3.0% separately, which can be seen that the rate in Zhejiang is obvious lower than Jiangsu. Further more, the proportion of technical development funds comparing with total sales income is 2.1% and 1.1% separately. Zhejiang is obviously at backwardness position, so that it is difficult to attract the first-class multinational companies investing in Zhejiang.
Although Jiangsu has much more technical talented persons than Zhejiang, many of them are foreigners. And the domestic specialists almost can not occupy the foreign capital firms’ key technology. The foreign investment high-tech industry, considering the strategy of strengthening global competition, is unwilling “spillover” technology to the same industry. So Chinese can not contact the core technology. It enables many enterprises can not through joint capital mode absorb and digest advanced technology. Additionally, the independent development ability is not strong, so it contains the advancement of industry technology and the potential of realizing technology exceeding. Especially high-tech product like communication equipment, computer and office equipment, because of lacking own core technology, their profit ability is restricted and pressed. Even some middle or high-tech products with independent intellectual property, also mostly belong to low end product, not comparable with developed countries in quality, performance, outward design, etc. So these firms just increased certain tax revenue, and solved partial labour force employment.
The professional believed that, Zhejiang established the developmental strategy of opening economy later than others, but so long as sets up long-term judgement and practical, Zhejiang may win in the new turn of using foreign capital. Moreover, Jiangsu has a long period to attract FDI and has got a certain success. But there are also deficiencies should be overcome. We should discuss the reasons next for a further understanding of different FDI attraction.#p#分頁標題#e#
4.2.3 Analysis of the reasons for different FDI attraction
In the year 2005, the actual utilizing FDI in Jiangsu got the first ranking comparing with the whole country, while Zhejiang got the fifth ranking, all of whom stayed in ahead. But through the data analysis, considering no matter actual scale of FDI attraction or economic effect of FDI attraction, Zhejiang had comparatively large disparity with Jiangsu. There are several aspects causing this disparity.
(1) Reason of policy regime
For a long time, Jiangsu and Zhejiang walked on different economic development ways It is an important and never neglected reason for FDI attraction. Jiangsu has always thought much of FDI attraction. Jiangsu’s government provided FDI policy regime much earlier than Zhejiang so that it always caught the opportunity of technology strategy adjustment, especially the “Internet Technology” which will bring high added value. Through attracting international IT industry investment located in southern Jiangsu, Jiangsu had developed newly industry and promoted economy development, all of which got significant effects. Moreover, Jiangsu concentrates on the development of large scale and efficiency enterprises, all of which can speed up the FDI attraction.
In the contrast, Zhejiang was always developing private enterprises, and the finance lack of economic construction was largely supplemented by private finance. On one hand, the development of private economy generated a sound marketing environment which is good for FDI attraction. On the other hand, the strong private capital gives an obstructive action. FDI flowing into was not only capital inflow but also technology and entrepreneur inflow. What’s the best location choice in order to get profit maximum? Of course it is the region which is short of entrepreneur resources but full of complete development conditions, such as higher labor quality, more complete infrastructure and favorable government policy. Zhejiang’s private economy provided lots of excellent entrepreneurs which discouraged FDI attraction.
Moreover, Zhejiang’s government hopes to protect the private enterprises’ development in order to protect local market, while Jiangsu’s government draws policy to promote the FDI attracting activities. Thus, Zhejiang’s FDI attraction was listed relatively behind which can be seen from the indexes of FDI/GDP, FDI export/total export, FDI dependency and so on. However, Jiangsu is lack of effective and clear supporting measures to encourage or restrict investment which leads the decrease of success ratio of FDI attraction.
(2) Reason of industrial infrastructure
The characteristic of future FDI attraction can be determined by the original industrial infrastructure. Jiangsu has come to maturity in supporting facilities since it began to attract FDI. It is obviously the difference comparing with Zhejiang. According to its perfect industrial infrastructure, Jiangsu province did great effort to secondary industry, especially the manufacturing industry. For instance, it mainly concentrates on electronic and telecommunication equipment manufacturing industry, the value output of which is significant large. In fact, foreign investment enterprises mainly put their capital targeting to secondary industry which may get a sound profit, especially the manufacturing industry. In addition, China’s manufacturing products have strong competitive power in the international market, so that the foreign investors are willing to invest in this industry. Although Zhejiang’s secondary industry has a higher percentage than the other two, it can not catch up with Jiangsu. For one thing, Jiangsu’s development of manufacturing industry is much earlier and more maturity than Zhejiang, and has much stronger supporting ability, so it can attract more foreigners to invest each city in Jiangsu. For the other thing, Jiangsu has more heavy manufacturing industry which can provide more profit and be favoured by foreign investors. #p#分頁標題#e#
(3) Reason of culture
Because of the advantageous location in China, Jiangsu and Zhejiang both have superiority nature environment to attract FDI. But there are several human culture reasons to create the differences of foreign investment attraction. Firstly, Jiangsu has cultivated a human investment surrounding which played a numerous intangible role. Lots of good universities are located in Jiangsu but only a little in Zhejiang. A good education provided the labors with high quality, mild temperament and peaceful as well as the superior public order. Moreover, Jiangsu’s region culture made the government and local enterprises have widespread good influence of behaving well and keeping their word. All of these human cultures made foreign investors favor to invest in Jiangsu. Secondly, Zhejiang has formed “Merchant Business” which shows that the people in Zhejiang eager to do business, especially in the cities of Wenzhou and Ningbo. In contrast, Jiangsu concentrates on large estate and industry investment instead of private business. So it is easier for Jiangsu to attract large amount capital in important industries. Further, Zhejiang’s “Merchant Business” pushes some local capital outflow as well as the talented people outflow. Although Zhejiang has many excellent entrepreneurs, the ages of them are general large or old, so that the knowledge structure becomes old and innovation ability becomes weak. The low level of human resources accumulation also discourages the FDI attraction.
Chapter Five
Conclusion & Recommendation
5.1 Conclusion
The analysis of this article concentrated on the factors as FDI scale, FDI mode, structure and also the policy regimes which have significant impact on the FDI attraction. Comparing with these factors, I discussed the economic effect with the relation between FDI and GDP using Granger test procedure, and then put forward the deficiencies in Zhejiang and Jiangsu provinces separately. Further more, several reasons were founded for these differences.
According to these deficiencies and reasons, some policy recommendations may suit for two provinces attracting FDI.
5.2 Recommendation
5.2.1 Recommendation for Jiangsu province
In the recent years, Jiangsu province has caught the opportunity that international capital transferred to Yangtze River Delta rapidly, and carried out active FDI strategy. As a result, the newly increased foreign capital made phenomenal progress, and lots of regions in economy and society development all listed in the front of the whole country. Jiangsu should base on the existent FDI scale, then rapid developing the quality and level of FDI attraction, improving investment environments and encouraging investment for new technology industry.#p#分頁標題#e#
(1) Aiming at industry transfer objective, and attracting FDI with high density and specialization.
When FDI attraction has got a certain scale, Jiangsu should have forward looking and direction. Especially, Jiangsu should pay attention to analyze and predict the characteristic, trend and orientation of international capital flow and industry transfer. Then, it should grab important countries or areas and main objectives to obtain actual effect. At the 1990s last century, Jiangsu took the opportunity of Taiwan’s capital transferring to mainland, and proposed strategies of FDI attraction in Suzhou, Wuxi, etc. But nowadays, Taiwan’s industries has fundamental completed the transfer and composition from Taiwan land and Chu Chiang Delta to Yangtze River Delta. So Jiangsu’s focal point of FDI attraction should transfer to “emphasizing on Japan and Korea, expanding Europe”. The cities and development zones should concentrate on different scale and different mode FDI attraction activities, such as high level development forum, investment talkfest, industry instruction meeting, etc. Through these activities, Jiangsu should try hard to take the opportunity of Japan and Korea industry transferring, constructing Japanese capital high land and Korean capital plate. When lots of cities attract Japan and Korea capital, some large cities should put the objective on the industry reforming after European Union expending toward the eastern. Then, these cities should organize FDI attraction group to go to Europe continually, and contact European companies directly, in order to get the primary opportunity of investment attraction.
(2) Establishing performance examination mechanism and strengthening FDI attraction group construction.
Jiangsu should attach importance to the construction of investment institution and professional FDI attraction group, and establish solid investment strategy of combining government attraction, institution attraction and non-governmental attraction. Every area constructs organizations like FDI attraction service centre and investment promotion centre, and allocates special people in charge of connection work. These people may be in charge of doing connection with industry and commerce organization, guild and transnational corporation in different countries or areas, or in charge of getting FDI program information, or starting large investment attraction activity abroad. In addition, they should give early service to local enterprises and help them to go out to invest factory construction. Through these people, Jiangsu can establish a special FDI attraction group with high quality. And through the mode of assigning outstanding people to do advanced study in college or train abroad, Jiangsu will construct a group with high quality people who will enrich the power of FDI attraction.
5.2.2 Recommendation for Zhejiang province#p#分頁標題#e#
Trough the analysis in former chapters, we should notice that Jiangsu is better than Zhejiang in FDI attraction. So Zhejiang should recognize the resent situation and plan a good structure to attract FDI effectively.
(1) Improving and optimizing investment environment, and speeding up the government construction of standardization.
Comparing with Jiangsu province, Zhejiang also has comparatively large distance in investment environment. So Zhejiang should consider the improvement of investing environment as the very important work of promoting region completeness. Then, the judgment system can be established. Meanwhile, Zhejiang may speed up the service type government construction, building soft-environment comparative advantage. Further more, some important things for the government are to reform administrative examination method, deeply impelling the contracture of standardization government, cleaning up administrative fee, and decreasing the stages and precondition of administration. Zhejiang’s government should build government affairs service environment connecting to internationality through conforming government affairs flow and improving efficiency. Other things may do is to establish complaint centre on line in order to widen the service region for FDI enterprises.
(2) Innovating the forms of FDI attraction, and carrying out specialization differences of FDI attraction.
Firstly, Zhejiang should adopt the mode of unanimous outward, so that it can change the former structure of autonomous outward and competition with each other. Then, the organization can plan for entire projects of resources and objects in FDI attraction. Secondly, the evaluation and reward systems should be reformed, really achieving “investment attraction and investment choosing”. But those capital-intensive projects which did weak or small spillover effect for Zhejiang’s economic structure and industry structure should be stopped. At the same time of giving attention to the scale of FDI attraction, the government should concentrate on the direction of foreign capital inflow and actual foreign quality, and then to strengthen the economic and social effect of FDI attraction. As well as organizing large investment attraction activities, the government also can launch specialized small group for FDI attraction to look at the main objective and main industry, and carry out marketization attraction mode. Referring Jiangsu’s successful behavior, Zhejiang can establish about 10 small specialized groups to progress technicality projects introduction and discussing with Japan, Korea, Taiwan, Hong Kong, Europe, America, etc. Further more, the construction and work launching of specialized FDI attraction groups should be given special capital and policy support.
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Appendix
Learning Statement
For the short one year study, I consider very fortune to learn so much knowledge and experience which are taught by teacher’s both from Leeds Met and ZJUT. In my learning statement, I will first indicate the reasons for my interest in this program. Secondly, my learning experience will be introduced. Learning from dissertation is the most important stage which I should emphasis on.
Reasons for my interest in the programmer#p#分頁標題#e#
I am interested in this program mainly due to its attractive variables which combine both the west and the east, such as teaching in English, innovations, professionalism and so on. Especially in the area of innovation, the operating of methodology of the program is the platform of business courses study. The development of innovation ability will help me to deal with every day’s different situation of world business industry.
In the program, I really feel something different from domestic study so that I am interested in it. Though my major in undergraduate course was international economy and trade, which lead to some courses have the same contents comparing with MAITF, the learning methods are different so that I get the different knowledge and skill from a same course.
Another reason is for teachers. I really thank my teachers in both universities, who brought me the new methods for study and the ability to observe the world economy from Leeds Met, and who helped me to overcome the barrier of language from ZJUT. I can gain excellent business mind from them.
Learning experience
This course includes lots of modules, such as Economics of International Trade, International Marketing, Corporate Finance, Trade Development and Growth, Management of International Business Finance, International Trade Law, Cross-Culture HRM and Research Methods. All of these are taught by excellent tutors in both universities.
Through their teaching, I recognized that they were willing to build on our inter-dependant and especially independent studying skills which mentioned me to do more lessons by myself. When I am studying by myself using the skills which taught by the tutors, I can learn them more quickly and gain more information which I want to get. But I really find this course is with difficulty and full of challenge so that I should pay more attention to learn it well. After these studies, I developed a range of self-management skills, in particular self-organization and time management skill. It also taught me how to use critical opinion to learning others conceptions, and how to read lots of literatures to understand a theory or an economic phenomenon.
In this program, I am not only satisfied with the structures of the course, but also the teaching progress and the positive mind of tutors in both universities. All of these will help me to do well in the future, which are listed as follows:
1. Knowledge received.
On the one hand, I gained the professional knowledge in the field of international trade and finance which include many modules. Each module brought me different information but all of them were connected with each other so that they formed a complete system. The most important activity is the serving of international markets with critical understanding on the research area and the areas about international finance corporation. This is the basis for my future thinking about economic problems. Further more, it provided me the ability to solve different situations.#p#分頁標題#e#
On the other hand, I promoted the English reading, listening, writing and speaking ability. Since all of the books are chosen by the teachers in Leeds Met and the formal lessons are taught by English, we must learn the course in an English phenomenon which can improve our English language skill. Maybe it is difficult in the primary time, but it is not difficult after one year’s study by tutors’ teaching and own studying.
2. Capabilities received.
After the one year study about MAITF course, I have gained capabilities in many areas. Firstly, I am able to demonstrate a critical, ethical and reflective approach to the field of international trade and finance. Secondly, I may evaluate, synthesize and apply advanced theories and techniques to a range of complex and open-ended issues, problems and situations in the field of international trade and finance. Thirdly, when in the absence of complete data, I can make informed judgments on problems and opportunities in the economic field. The data can be analyzed by my analysis using the knowledge which is taught by my excellent teachers. Fourthly, I have learned interdependently and independently and accept responsibility for subsequent career and continuing professional development. It is very important for my future. Further more, I am able to demonstrate originally in the application of theory and techniques, drawn from earlier studies, through the production of a significant piece of high level independent work.
To sum up, it comes into feasibility for my learning skill. From the course, I learned how to read, understand, critically analyze and evaluate issues. Especially the case study, I really reached a good method to do it, and through reading relative articles, lots of other information was brought to me. As a result, I enjoyed myself when studying, studying with the course, with the tutors in Leeds Met and ZJUT, with my classmate and with myself. So I will continue to study regardless of whether there are teachers to teach me.
Learning from the dissertation
Doing the dissertation is a hard but interest experience. It is intended to provide opportunities for me to evaluate, synthesize and apply advanced theories and techniques, and demonstrate originally in the application of theory and techniques through the production of high level independent work.
During the period of drawing dissertation, I devoted myself to these aspects including literature reading and review, primary data and secondary data collecting which were most important to my dissertation and future study. On the one hand, literature review and secondary data are collected mostly by reading books, articles in the magazines, and information on the website. Firstly, most information which collected from the books is the originally theories, all of which provide the basic conception of FDI attraction. And lots of secondary data is from the statistical yearbooks in Zhejiang province and Jiangsu province. Secondly, the information collected from the articles in the magazines is mostly the actual situation about economy in domestic or foreign countries and areas. There are economists’ research, sociologists’ vision, politicians’ policy analysis and their commendations, which help me to understand the current environment in FDI attraction not only about the invested countries but also about the investing countries. Finally, lots of secondary data information is collected from the website, especially the statistical website of Statistic Department. One the other hand, primary data collection is a challenge to me in the beginning. I couldn’t sure which way was the best on interviewing officers. So I should prepare for it with the questions: What information should be collected? Who will provide the relative data to me? How can I take the interview step by step? The process of thinking questions also provides me a practical ability.#p#分頁標題#e#
Sometimes I feel it difficult to decide to focus on literature search or literature research. Under this circumstance, it is easy to feel overwhelmed and tired by the amount of material to review. Therefore, I told this to my tutor who always gave me kind support and right guidance. Thanks for her help that I almost unscrambled my thoughts of the structure and concept about my dissertation. I am able to examine the list of areas which as follows:
1. Identity the centre research question, and then definite the topic.
2. Clearly explain and define the constituent elements of research objectives.
3. Evaluate and explain alternative research methods and justify an appropriate research design for the research questions chosen.
4. Develop a suitable methodology to undertake the research.
5. Critically review the literature in a chosen field.
6. Prioritize and select appropriate theory and models relating to the topic area.
7. Demonstrate skills in using appropriate analytical techniques.
8. Present the findings suitable and professionally, within the guideline provide, and then do some discussions.
9. Present precise and cogent written abstract of the dissertation.
10. Display creativity and originality at all stages of the research process as well as the conclusions and commendations of the dissertation.
In short, the process of doing the dissertation improved my capability for dealing with the areas of individual and communication successfully. Also, learning skill is improved by reading numerous books and articles, and doing selection and critical analysis. Working in the dissertation is enjoyable for me. An important reason for it is that there are lots of help from my tutors and friends. Firstly, I have gained lots of help and guidance from my tutors so that I can approach my research project smoothly. Moreover, I have acquired knowledge and the ability to do research through undertaking how feasible this research project is, reading books and articles and collecting data as much as possible. Secondly, I always discuss the structure and grammar with my friends so that we can get improvement together. Thirdly, communicating with my tutors and friends itself is a happy activity.
Conclusion
From the above analysis, I have referred the strength of this course. What I have learned from MAITF in the one year study provides me lots of knowledge, skill, ability for my future life and career. Through the process of study, I gained confidence, strength and maturity what will influence my future life. And I believe that good opportunities and chances will be met. I am very proud of taking the postgraduate of award of MAITF at Leeds Metropolitan University successfully.#p#分頁標題#e#
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