A Demonstrational Analysis of Relationship between FDI and Industrial Structure Upgrading in China

FDI inflows in China has fluctuated in recent years. As labor and resource price rise, many foreign-invested enterprises gradually withdraw from China, while the current industrial structure and other economic changes further accelerated closure of many processing trade enterprises. In the context of the “double transformation” and the financial crisis, it is of great significance to conduct industrial upgrading and growth mode transformation. This paper uses cointegration analysis, dynamic variance decomposition, and other modern econometric approaches to conduct the empirical study on mutual influence between China’s industrial upgrading and the FDI. The results indicate: the industrial upgrading and FDI have long-term stable relations and promote mutually, but the industrial upgrading changes more depend upon own change as well as forcesome foreign capitals to leave China and other conclusions.