Contribution of FDI to Employment in FDI Firms and SOFI Firms in China [연구보고서2003-12]

Contribution of FDI to Employment in FDI Firms and SOFI Firms in China

This paper examines the effects of foreign direct investment (FDI) and state-owned fixed asset investment(SOFI) on em. ployment in China using the standard Hamiltonian function. Results of our study show that total FDI inflow into China have had limited effects on employment, while state-owned investment enterprises have had positive effects. Thus, the amount of employment in China is still centered in state owned enterprises(SOEs). However, FDI inflows from countries that are closely related with mainland China or newly industrial countries(NICs) such as Hong Kong, Macao and Taiwan, exhibit positive effects on employment in secondary industries i.e. manufacturing industries with labor-intensive characteristics, but have negative effects on employment in tertiary industries such as service industries that are largely capital-intensive and technical-intensive. In contrast, FDI inflows from other developed countries have positive effects on employment in tertiary industries, while having negative effects on employment in secondary industries.