The Analysis of the Spillover Effect of Foreign Direct Investment in China

Abstract: This study analyzes the effects (Horizontal Effects, Backward Effects and Forward Effects) of FDI by analyzes the spillover channels and the purpose of FDI and the integration strategy of Multinational Corporation. Based on industry level panel data from 1995 to 2003 of China, we find positive FDI spillovers taking place through backward linkages to suppliers in the host countries. Horizontal Effects and Forward Effects, on the other hand, are generally negative. Generally, FDI gives positive effects on the economic growth in China. Therefore, under the circumstances of economic globalization and trade liberalization, China should continue to enhance the scale and quality of FDI inflow…
Key words: Foreign Direct Investment; Horizontal Effects; Backward Effects; Forward Effects

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