Abstract
In recent years, many scholars attributed the phenomenon of manipulation and mutually negotiated frequently reported in the media to the control of foreign companies in the industry. However, there are also some scholars who held the opposite view that none of the foreign-invested enterprises has raised prices of their products. To this end, this study analyzed the influence mechanism and effect of foreign capital entering to the changes of china's industrial sectors price using panel data of China's industrial sectors. The study found that: the entry of foreign capital influenced the change of China's industrial sectors price through raising labor productivity and weakening monopoly power. Research results indicate that, since China's reform and opening up, the entry of foreign capital promoted the raising of the Chinese industry sectors labor productivity, weakening monopoly power of some industry in China, reducing China's industrial sectors prices and curbing inflation on the whole, thereby it improved the level of the Chinese social welfare.
Highlights
Since the reform and opening up, along with the development of economy and investment environment, foreign investors have made large-scale systematic investments in China
The purpose of the simultaneous equation model is to determine whether foreign investment entry affects the price changes of China's industrial industry through labor productivity and monopoly power, and how big influence is
The estimated results of the labor productivity equation in column (2) show that the coefficients of short-term foreign investment entry and long-term foreign investment entry are significantly positive, which indicates that both long-term and short-term foreign investment entry can promote labor productivity growth, and the coefficient of the lagged labor productivity is significantly negative, which indicates that the adjustment effect of labor productivity from non-equilibrium state to equilibrium state is significant
Summary
Since the reform and opening up, along with the development of economy and investment environment, foreign investors have made large-scale systematic investments in China. Industries controlled by state-owned capital exhibit more obvious monopoly characteristics and is the main cause of the price rise in China's industrial sector [14-16] This raises interesting and important topic: does foreign investment affect the price changes of China's industrial sector? There are two main questions of answers in this article: First, what is the impact mechanism of foreign investment on price changes in China's industrial sector? What specific impact does foreign investment have on price changes in China's industrial sector?To answer these questions, this paper draws on existing literature and studies the impact mechanism and effect of foreign investment on price changes in China's industrial sector from a dual perspective of labor productivity and monopoly power, so as to provide insights for relevant governmental departments in terms of establishing policies on foreign investment’s entry and anti-monopoly There are two main questions of answers in this article: First, what is the impact mechanism of foreign investment on price changes in China's industrial sector? Second, what specific impact does foreign investment have on price changes in China's industrial sector?To answer these questions, this paper draws on existing literature and studies the impact mechanism and effect of foreign investment on price changes in China's industrial sector from a dual perspective of labor productivity and monopoly power, so as to provide insights for relevant governmental departments in terms of establishing policies on foreign investment’s entry and anti-monopoly
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