High-Tech Industrial Clusters and Industrial Upgrading in China - Coursework Example

In China industrial clusters consisting of small and medium enterprises have been proliferating in areas where private sectors have successfully developed. The large scale of foreign direct investment which has entered into Chinese markets could improve the economic development of eastern coastal areas through accelerating the formation and centralization of capital, Technology Overflows, upgrading of the industrials structure, and the human capital formation. On the contrary, the fast speed of the economic development of eastern parts would also increase the earning of the local residents, enlarging the demand of the market, improving the Total Factor Productivity, promoting the external environment, and reducing costs, which could possibly bring into being a cluster economic effect, accordingly, there would be more foreign direct investment entry into the market. Among all the industrials, the most distinct industrial is the high-tech industry, which has recently influenced Chinese economic development the most. In this proposal, we will write about how the FDI brought an impact on the Chinese economy, which would mainly focus on the high-tech industries, and give the result and some suggestions after the particular analysis.

1. The background and statement of Problem

(Since the beginning of the far-reaching economic reforms of 1978, China’s economy has been growing at a breakneck pace of 9.5 percent a year. If it were now to grow at 8 percent per year, doubling every nine years, income per person in 2031 for China’s projected population of 1.45 billion would reach $38,000. (At a more conservative 6 percent annual growth rate, the economy would double every 12 years, overtaking the current U.S. income per person in 2040.))how have you got these figures? The rest of it is a simple calculation.

After more than twenty years’ reform and opening-up, China is gradually integrating into the global economy. The degree of internationalization has also improved to a great extent, as well. It’s been the first in developing countries and the second in the world country attracting the most foreign capital during many years. The level of investments by Multi-National Enterprises in the Chinese market has increased over a period of time. As is presented in Table-1

Table1: Directly investment from 1995-2002

Year

Increased Foreign Enterprises (Number)

Agreed Foreign Investment    (Billion US dollars)

Actual Foreign Investment    (Billion US dollars)

1995

4056

12.97

4.78

1996

2737

9.83

5.07

1997

2108

9.27

5.79

1998

1843

7.57

6.65

1999

1936

6.98

6.4

2000

2648

10.61

6.42

2001

3581

15.1

7.12

2002

5801

19.67

10.37

MNEs direct investment has become an important power in the Chinese economy that cannot be neglected and which could obviously impact Chinese fixed investment and capital stock. As figure 2 shows:

Table 2:The proportion of Actual Usage of investment from Multinational to permanent assets

Year

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Proportion

12.13

17.08

15.65

15.1

14.79

13.23

11.17

10.32

10.51

10.1