With the internationalization of service industry, it has become an indisputable fact that foreign direct investment has turned to service industry. The following is my paper on foreign investment in service industry for your reference. Model essay 1 on foreign investment in service industry: the dual effects of transnational investment in service industry and the countermeasures of the host country

Abstract: With the further opening up of China's service industry, more multinational companies will be attracted to enter this field. Multinational companies' investment in service industry has both positive and negative effects on the development of host country's service industry. This paper mainly discusses the dual impact of transnational investment in service industry on China, analyzes the advantages and disadvantages, puts forward countermeasures, and puts forward some suggestions for the service industry market that will be fully opened soon.

Keywords: service industry; Spillover effect; Introversion effect

1. Dual effects of transnational investment in service industry

1. Positive effects: Spillover effect

Spillover effect refers to the indirect effect of foreign direct investment on the economic benefits and economic growth or development capacity of the host country. This spillover effect can be shown as both positive and negative. Here, we mainly discuss the positive spillover effect. The spillover effect of foreign direct investment is mainly manifested in other factors that affect economic growth except capital and labor, thus improving the total factor productivity and promoting economic growth. The contribution of total factor productivity to economy can be divided into three aspects: industrial structure change, technological progress and institutional change.

1. industrial structure effect. The change of industrial structure mainly refers to the change of the proportion of the output value of the primary industry, the secondary industry and the tertiary industry in the gross national product. According to the theory of economic growth, the process of a country's economic development is a process in which industry and service industry replace the important position of agriculture in the national economy. The smaller the proportion of the output value of the primary industry to the GDP, the faster the industrial structure changes, and the higher the degree of upgrading of the industrial structure. On the industrial structure effect of foreign direct investment, based on Japanese scholar Kaname Akamatsu's? Goose flying mode? The most famous. Kaname Akamatsu believes that the development of an industry in a country generally goes through several stages, such as import, local production, export development and export growth. With the increasing import of an industry, domestic production and export have appeared successively, and its graphics are like flying geese. ? Goose flying mode? It shows that the industrial structure effect of foreign direct investment comes from the effective use of the comparative advantages of the host country. What foreign direct investment brings? A package? Resources, especially technology and management skills, will not only help China to establish new industries, but also upgrade traditional industries and make inward-oriented industries evolve into export-oriented and internationally competitive industries.

with China's accession to the WTO, the improvement of the openness of most tertiary industries and the adjustment of foreign direct investment policies, the proportion of investment in the primary industry has been declining year by year, while the proportion of manufacturing in the secondary industry has been increasing day by day, which is closely related to the concentration of transnational investment in the manufacturing field in previous years. Although the growth rate of service industry in tertiary industry, as a new investment hotspot, is not obvious, service industry investment has become a global investment trend. Therefore, the proportion of tertiary industry investment in GDP will increase day by day, which will drive China's industrial structure to upgrade, from a manufacturing country to a service country.

2. Technology spillover effect. Technology is a broad concept, which includes not only production technology and methods, but also management technology and the improvement of workers' quality. Therefore, human capital and R& D capital to measure technological progress. According to the analysis of endogenous growth theory, technological progress mainly comes from human capital and R&; D production of capital. Therefore, the technology spillover effect of foreign direct investment should also be achieved through human capital and R&; D capital two channels to achieve. The impact on human capital is mainly the training of local employees by the branches of multinational companies in China. And trained employees? Job hopping? It is the main way of technology diffusion. Foreign direct investment R&; The influence of D capital is mainly manifested in two aspects: first, the R&D activities carried out by foreign branches of multinational corporations in China have enhanced the technology diffusion effect to some extent; Second, the competitive effect of multinational companies participating in the China market competition. In the long run, when foreign companies and local companies compete with each other in the same market, local companies will inevitably increase research and development funds and improve the technical level of enterprises in order not to be at a disadvantage in the competition. FDI in service industry brings advanced technology, knowledge and skills, including hard technologies such as equipment and technological processes, and soft technologies such as management and marketing. However, the technology combination contained in the service industry is different from the manufacturing industry. FDI is not the main way for the service industry to acquire hard technology, but soft technology is the main form for transferring knowledge and technology. For example, in industries such as banking, insurance and restaurants, investors will train their subsidiaries in a series of skills and knowledge.

3. institutional change effect. The influence of institutional factors on economic growth is mainly manifested in institutional changes, and the changes of China's economic system are mainly manifested in four aspects: the change of property rights system, the improvement of marketization, the change of distribution pattern and the degree of opening to the outside world. A country's economic growth is realized within a certain institutional framework. Utilizing the role of foreign direct investment is one of China's opening-up behaviors, which is itself a kind of institutional change. In addition, foreign direct investment mainly comes from developed market economy countries. In order to attract more investment, it is necessary to improve the market environment, so as to promote the continuous improvement of China's marketization. According to the viewpoint of new institutional economics, institution is an important factor of economic growth, and a country will promote economic growth and development through institutional changes, thus producing institutional performance. The institutional performance of foreign direct investment in China mainly means that it promotes the economic development of China by influencing some factors that determine the institutional supply and demand in China.

(2) negative impact: introverted effect

1. Most service FDI aims at market development, seeking non-transactional activities, and may remit profits in the form of external payment, so it may not only have no effect on increasing foreign exchange income, but may have a negative impact on the balance of payments. Many multinational companies evade taxes through profit transfer, which seriously interferes with the market order of the host country. In the late 1991s, tax evasion by multinational corporations reached 31 billion yuan a year, equivalent to one twentieth of China's fiscal revenue in recent years. More than 61% of foreign companies have abnormal losses. At present, there are more than 411,111 foreign-funded enterprises in China, with an annual loss of more than RMB 121 billion. However, a considerable number of foreign enterprises transfer their profits through various tax avoidance methods, resulting in large-scale losses on their books.

2. The related industries in the host country have been greatly impacted. Under the original high protection of the host country, such as banking, telecommunications, tourism and other industries, their domestic markets are not completely competitive, or even monopolized, so their ability to adapt to the market and improve their competitive advantages is limited. With the entry of foreign capital in these industries, the original domestic enterprises in the host country have been greatly challenged in terms of capital, experience, skills and innovation. Multinational companies often acquire local enterprises in the same industry or even leading enterprises and their original brands on a large scale by virtue of their abundant funds, thus forming a monopoly of technology, brand, market and industry in the local area. This situation exists in many industries in China, and some of them are still very prominent, which not only seriously suppresses the development of national industries, but also infringes on consumers' rights and interests after the formation of brand market monopoly, posing a severe challenge to China's economy and industrial security.

3. Foreign-funded service organizations will compete with local enterprises in the host country for human resources more fiercely, and their working conditions and salary conditions may lead to a large number of outstanding talents flowing to foreign-funded enterprises, which will bring more difficulties to the development of local enterprises. Take the financial industry as an example. After foreign banks entered China, a large number of backbones of Chinese banks jumped ship or were hired to foreign banks with high salaries, which brought double risks and pressures to Chinese banks with insufficient development.

4. FDl in service industry may bring three risks. If the host government has poor management and control and lacks effective rules and regulations, it may bring serious domestic economic turmoil in terms of system; If there is no strong control in the management of public utilities and privatization, it may lead to private monopoly; In addition, because countries have great differences in social and cultural backgrounds, the operation of foreign capital in these fields is likely to cause conflicts and injuries.

II. Countermeasures for China's service industry

The average inflow of service FDI in China from 2111 to 2112 was US$ 12.815 billion, and the stock in 2112 was US$ 259.689 billion; The service industry accounted for 24.7% of the total FDI inflow in 2112, accounting for 31.4% of the total stock; China will fulfill its WTO commitments and further open its service industry, so it has great potential in attracting more FDI in service industry. Go out? Is still in its infancy, so in this kind of? Bring it in? And? Go out? Under the premise of both opportunities and challenges, we should scientifically analyze the environment, establish and strengthen our own comparative advantages and competitive advantages, maximize the positive effects of FDI in services, and improve the level and ability of China's foreign direct investment.

1. further enhance the industrial structure of domestic service industry and improve the ability to undertake international direct investment in service industry.

according to the general law of industrial investment, under the condition that other conditions remain unchanged, the equivalent capital investment of the investor may obtain higher returns in areas with the same or higher level of industrial development structure as the home country than in areas with lower level of industrial development structure. As far as international direct investment in service industry is concerned, because the structure of international service industry is developing in the direction of knowledge-intensive, only countries (regions) that develop knowledge-intensive service industry can provide higher income for international direct investment and attract more international direct investment. In view of the low level of service industry structure in China at present, the traditional labor-intensive and resource-intensive service industries such as catering, commercial retail, transportation still occupy the main position, and the low proportion of modern service industries such as telecommunications services, information technology services, modern logistics and modern finance, it is necessary to vigorously develop modern service industries, transform and upgrade traditional service industries, and constantly optimize the service industry structure to improve the overall quality and international competitiveness, whether in terms of China's future industrial restructuring or attracting more international direct investment. There are two aspects to improve the industrial structure of domestic service industry and the ability to undertake international direct investment in service industry.

first, give priority to the development of producer services such as information services, modern finance, modern logistics and e-commerce that support the efficient operation of the national economy, vigorously develop intermediary services such as consulting, legal services and scientific and technological services, and actively develop industries with great demand potential such as tourism, culture and sports. These are all knowledge-intensive service industries. Only by fully developing these industries can we form a high-level and reasonable modern service industry structure system.

the second is to make full use of various forms of international industrial transfer of service industry. Generally speaking, there are three levels of international industrial transfer: project outsourcing, offshoring and foreign direct investment. The specific forms include newly established investment, merger and acquisition, venture capital and so on. The international industrial transfer of service industry is no exception. We should create a favorable policy environment to support China enterprises to undertake international project outsourcing, and relevant departments should provide necessary information and consulting services for domestic enterprises, guide them to actively participate in the international project outsourcing market, undertake outsourced projects, and effectively cooperate with foreign service enterprises; Allow and encourage foreign investors to invest in China through mergers and acquisitions, foster an institutional environment conducive to absorbing M&A investment, and create favorable conditions for service multinational companies to participate in enterprise restructuring and transformation.

2. Make use of the spillover effect of FDI as much as possible and try to reduce the introverted effect.

whether the spillover effect is easy to realize depends on the ability and motivation of host companies to invest and learn to absorb foreign knowledge and skills. Foreign capital has not only brought abundant capital, technology and knowledge, but also advanced professional skills, marketing concepts and scientific management experience can be learned through the operation and training of foreign capital in China. There are two indirect effects, one is to serve the development of China's manufacturing industry, and the other is to set an example for the development of China's service industry. Chinese enterprises can try to join the strategic alliance of multinational companies, participate in their industrial chain and localization process, and gain the ability to improve their independent research and development and innovation.

Establish and improve domestic institutions and mechanisms to monitor the development of foreign capital in China and reduce the introverted effect. UNCTAD believes that it is necessary for developing countries to be cautious about attracting foreign investment in service industries. Because in some monopolistic industries (such as telecommunications services) or public utilities and infrastructure, if there is no effective monitoring, it is easy to abuse market power and lead to private monopoly. In addition, the use of transfer prices by multinational companies will also cause damage to the domestic economy. In terms of human resources, our government should increase investment in education, improve the overall level of talents, reform the household registration and talent management system, and reduce the cost of talent flow, which will not only provide human resources for multinational companies to invest in China, but also reduce their advantages in competing with Chinese-funded enterprises for outstanding talents to some extent, and ensure that Chinese-funded enterprises have sufficient human capital, knowledge accumulation and technological innovation capabilities.

3. Improve the domestic service consumption level and relieve the worries of international direct investment in service industry.

whether the products produced by investment can be cleared in the market is the ultimate limiting factor affecting investment. Theoretically, only when all products can be sold and the market is cleared can the investment be successfully reproduced. Investment in service industry is no exception. At present, the per capita income level in China is not high, the urbanization process is slow, and the gap between urban and rural areas is too large, which objectively limits the demand space for service industry development; On the other hand, due to some prejudice in the past on service industry and service consumption, the service industry was regarded as intangible production and its high added value was ignored, and the simple industrialization was equated with industrial development, while the supporting role of the service industry in improving industrial competitiveness was ignored, and the consumption of the service industry was overemphasized and its industrialization was ignored, resulting in insufficient attention to the development of the service industry for a long time and service consumption hovering at a low level. The lack of development of some domestic service industries and the inability to attract foreign investment are not unrelated to the lack of market demand. Therefore, cultivating residents' service industry consumption ability and improving domestic service industry consumption level will become an important measure to relieve the worries of international direct investment in service industry and attract more international direct investment.

References:

[1] Jiang Zhimei. The new trend of international transfer of contemporary service industry and China's countermeasures [J]. Economic Horizon, 2116, (9)

[2] Zhao Shuhua, Song Zheng. Analysis of the economic effects of direct investment by service multinational companies in China [J]. International trade exploration, 2116, (1)