FDI Trade and Spillover Efficiency：Evidence from China`s Manufacturing Sector

Abstract

Using firm data from the 1995 Third Industrial Census of China, this paper finds\r\nthat the presence of foreign ownership has a positive and significant effect on domestic firms’ productivity. Moreover, trading with more advanced countries helps China\r\ngain access to new technology and information, which improves its productivity and\r\nenables it to compete in international markets. It is found that China’s imports from\r\nOECD and the four Asian Tigers, and exports to OECD have positive effects on\r\ndomestic firms’ productivity. By dividing industries into high-technology-gap and\r\nlow-technology-gap groups, it is found that the spillover effects of FDI are larger\r\nfor the low-technology-gap group than for the high-technology-gap group. However,\r\nthe estimation results of the trade-induced technology spillover effect support\r\nthe technology-gap learning theory and the significance of importing appropriate\r\ntechnology.