Foreign Direct Investment ( Fdi )

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Introduction 1.1 Research Background Foreign Direct Investment (FDI) refers to an investment made by a firm or entity based in one country into a firm or entity based in another country. The investing firm may make its overseas investment in many forms, like mergers and acquisition or building new facilities in overseas (Hannon & Reddy, 2012). Thus, FDI have been a significant driver of economic development in China since the start of the Reform and Opening Policy in 1978 – 1979. Since the start of the reforms, China has begun to integrate more into global economy via trade and investment and become one of the most attractive economies for FDI flows from investors all over the world. According to the UNCTAD, China has exceeded the United…show more content…
. FDI is believed to make a significant contribution to capital accumulation in emerging economies, such as China (Sjöholm, 2008). However, as for the influence on employment, the impact of FDI appears to be more ambiguous as direct and indirect effects on employment can be observed. The effect that FDI has on the employment is one of the most evident influences of foreign investments on the whole economy of a country. Yet, in the context of China, there was an abnormal trend in which gross domestic product and FDI were growing while employment was falling (Chen, 2012). Thus, this phenomenon is important to explain and interesting to examine. 1.3 Research Aims and Objectives The main purpose of the study is to evaluate the effect of FDI on employment in China. The study will be able to answer the following questions in this dissertation: - To what extent dose FDI have significant impact on the level of employment in China. - Are there supplementary macroeconomic factors that help to explain the state of the labour market in China The purpose of the dissertation will be achieved with the help of the following objectives: - To test statistical significance of the effect of FDI inflows on total level of employment in China - To estimate the effect of FDI on sectoral employment in China. 1.4 Working Hypotheses The working hypotheses are constructed following to the proposed aim and objectives of

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