The effect of FDI on employment in China
Since the launching of its Reform and Opening Policy, China has begun to integrate more fully into the global economy through trade and investments. Along with deepening of the Reform and Opening Policy and the trend toward ever-increasing economic globalization, the scale of attracting foreign investment into China has also grown. Foreign direct investment (FDI) has played a crucial role in promoting China's economic growth, and employment is an important aspect of economic development. To gain a better understanding of the relationship between FDI and employment in China, this thesis examines longitudinal macroeconomic data to assess the effect of FDI inflows on job creation in China. This topic is analyzed from two dimensions: (1) the relationship between FDI and total employment for the entire Chinese national economy, and (2) the relationship between FDI and employment for each of the three sectors of the economy (primary, secondary, and tertiary). This analysis was conducted using time series regression models estimated for annual data between 1985 and 2011. The outcome shows that there is no significant positive relationship between FDI and employment overall for the entire Chinese national economy, and that the relationship between FDI and employment differs by sector. There is a significant positive relationship between FDI and employment for the primary sector. For the secondary sector, there is no significant relationship between FDI and employment, although gross domestic product (GDP) has a significant positive effect on employment. For the tertiary sector, FDI has a significant negative relationship with employment, and GDP has a nearly significant positive effect on employment.