Open Journal of Social Sciences, 2014, 2, 54-58
Published Online September 2014 in SciRes.
How to cite this paper: Liu, S.Q. and Mei, Y.X. (2014) Study on the Existing Problems and Their Countermeasures of the FDI
Utilization in Jiangsu. Open Journal of Social Sciences, 2, 54-58. js s .2014.29009
Study on the Existing Problems and Their
Countermeasures of the FDI Utilization in
Shuangqin Liu, Yingxue Mei
Business School of Hohai University, Nanjing, China
Email: lsqcarol@163.c om
Received May 2014
Jiangsu Province has convenient ocean, land and air transportation and great transportation ca-
pacity. There are 128 regular higher education institutions in Jiangsu, ranking the first by number
in China. By the end of 2012, Jiangsu has a gross product of RMB 5405.822 billion, accounting for
10.4% of the GDP of China as per Jiangsu Statistics Bureau (2013). According to the statistics of the
National Bureau of Statistics of the People’s Republic of China (2013), in 2012 in China, Jiangsu
Province’s economy ranked the second. With its advantages Jiangsu has attracted foreign direct
investment (FDI) from all over the world. In 2012, there were 4156 contracted FDI projects. The
contracted and the actually utilized FDI values reached US$57.14109 billion and US$35.75956 bil-
lion respectively. Not only has FDI brought capital, advanced technology, state-of-the-art man-
agement methods etc. for Jiangsu, but also it plays a very important role in Jiangsu’s economic de-
velopment. However, in Jiangsu’s utilizing FDI some problems are existing, such as industries
tending to be of the low end, imbalance in industry distribution, weak absorptive capacity of high
technology, leading to environment pollution etc. This paper aims at analyzing the problems by
SWOT method and puts forward some countermeasures for Jiangsu to develop its economy effec-
tively by means of FDI.
FDI Utili z ati on , Ji an gsu, Prob lems, Countermeasures
1. Introduction
Jiangsu Province is located to the east coast area of China with convenient ocean, land and air transportation.
There are 128 regular higher education institutions in Jiangsu, ranking the first by number in China. As per
Jiangsu Statistics Bureau (2013), by the end of 2012, Jiangsu has a total gross product of RMB5405.822 billion,
accounting for 10.4% of the GDP of China. In China in 2012, Jiangsu Province’s economy ranked the second.
Because of the various advantages lots of foreign direct investment (FDI) from all over the world has been con-
ducted in Jiangsu. 4156 FDI projects were contracted in Jiangsu in 2012. The contracted FDI and the actually
S. Q. Liu, Y. X. Mei
utilized FDI values are US$57.14109 billion and US$35.75956 billion respectively. FDI has brought capital,
advanced technologies, modern management methods etc. for Jiangsu, and plays an important p art in Jiangsu’s
economic development. However, there are some problems existing in Jiangsu’s utilizing FDI. This paper
adopts SWOT method to analyze the problems and puts forward some countermeasures for Jiangsu to develop
its economy effectively by using FDI.
2. Literature Review
De Mello thought that FDI can promote the economic development of the host countries by adding their new
capitals based on the new economic growth theory [1].
Hill & Athukorala emphasized that FDI can not only expand the export of the host countries and increase
their abilities to improve their products and service, but also bring them tangible and intangible resources such
as capital, R & D, knowledge, technology, managing experiences etc. [2].
Kumer pointed out that the effects that FDI projects bring to the host countries depend on the new knowledge
and its diffusing scope in the economy FDI brings, the new overseas market for the manufactured products
brought by FDI, the contribution to establishing technical competence by FDI, etc. [3].
According to Sang Baichuan, China should continue to use FDI, which can add capital supply, promote eco-
nomic growth, increase employment and tax revenue, and change social and economic conditions [4].
Matar analyzed the absorptive capacity of FDI in Arabian countries and found that Arabian countries have
learnt high supervision quality [5].
Johnson’s research shows that the inflow in developing countries has promoted their economic growth, but
not in developed countries [6].
Zu Qiang et al. studied the relations between FDI and the economic growth in Jiangsu [7]. Hao Sijun et al.
analyzed how FDI affects the economic development of Jiangsu [8]. Wan Li et al. studied how FDI is used in
the agriculture of Jiangsu [9]. And Bu Shengjuan analyzed how FDI influenced the environment quality of
Jiangsu [10].
The above researches are conduced from a certain perspective. This paper mainly discusses how Jiangsu
should effectively take advantage of FDI and make it promote the economic development of Jiangsu.
3. SWOT Analysis
Based on the researches on FDI, SWOT method is adopted to analyze the FDI utilization in Jiangsu as shown in
Figure 1.
4. The Existing Problems of FDI Utilization in Jiangsu
On the basis of the above analysis and integrating with Table 1, it can be found that the problems existing in the
FDI utilization of Jiangsu are as follows.
4.1. Industries Tending to Be of the Low End
FDI utilization of Jiangsu mainly focuses on secondary industry, which is of low class, and most of which are
labor-intensive and thus c annot promote the updating or optimization of the industry structure. There are few
FDI enterprises with high technology. The industry cluster level and utilizing rate of high technology are not
high enough. FDI is focused excessively on the mature industries.
4.2. Imbalance in FDI Industry Distribution
It can be seen from Table 1 that FDI in Jiangsu is mainly on manufacturing, such as textile, clothing, shoe, cap
making, metal ware industries, etc. FDI in agriculture, forest, herd and fishing industries is more than before but
still very low compared with manufacturing. Therefore, FDI in the industry distribution is not r e aso n ab le .
4.3. Imbalance in FDI Region Distri buti on
The south part of Jiangsu is near Shanghai with good infrastructure conditions and economic technology bases,
thus attracting many multinational companies and resulting in cluster effect. While the north and middle parts of
S. Q. Liu, Y. X. Mei
Figure 1. SWOT Analysis of FDI Utilization in Jiangsu.
Table 1. FDI Utilization by Industries with over 100 Projects (2012) Unit: US$10,000.
Industry Project Contracted FDI Actually Utilized FDI
Total 4156 5,714,109 3,575,956
Agriculture, forest, herd and fishing 282 274,033 148,365
Manufacturing 2246 3,759,928 2,232,844
Textile, clothing, shoe, cap making 190 146,701 94,034
Metal ware making 112 204,083 102,202
General equipment making 444 668,949 320,504
Special equipment making 238 337,113 174,091
Transportation equipment making 157 383,211 229,967
Electrical machinery and equipment making 245 520,077 290,337
Communication apparatus, computers and
other electrical equipment making 276 435,418 247,752
Information transmission, computer and software 182 77,052 27,212
Wholesale and retail 627 333,207 174,639
Leasing and business service 236 234,658 111,921
Scientific research, technical service
and geological exploration 178 52,400 37,013
S. Q. Liu, Y. X. Mei
Jiangsu cannot attract much FDI compared with the south part, due to thinking, concepts, economic base, local
environments, insufficient opening level and so on, thus resulting in a large gap between the north and middle
parts and the south part.
4.4. Weak Absorptive Capacity of High Technology
In the FDI in high tech industries, multinational companies don’t disclose their technology, so enterprises in
Jiangsu are unable to learn their core technology, making them unable to absorb or learn advanced technology
by means of joint ventures, unable to increase their R & D competences, especially competences in high-tech
products including communications equipment, computers and office equipment. The profitability is limited be-
cause of lacking the core technology. Besides, some key technology has to depend on foreign companies.
4.5. Leading to Environment Pollut i on
That FDI is not used effectively is attributed to the investing in the industries with high energy consumption and
high pollution of FDI, thus further aggravating resource shortage and environment pollution. And the resource
shortage and environment pollution will adversely affect FDI.
5. Countermeasures
5.1. Widening FDI Fields
FDI utilization in Jiangsu focuses on manufacturing, so FDI in the secondary industry especially processing in-
dustry and labor intensive industries should be controlled, and FDI should be led to new agricultural technology
and comprehensive land resource development, moving gradually from manufacturing to the capital and tech-
nology intensive industries such as equipment making, service, infrastructure, and high tech industries. Integrat-
ing FDI use with increasing industry structure and technology level, regarding the structure optimization as the
basic standard of FDI, FDI should be led to the tertiary industry from secondary industry by means of policies.
5.2. Optimizing FDI Structure
In the FDI u tilization in Jiangsu, there is an increase in agriculture and service, but with the expanding of the
quantity and the scope of FDI, the structure of FDI is found more and more unreasonable. Related policies
should be made to adjust the FDI strategy, i.e. transferring from the present manufacturing to the tertiary indus-
try gradually. The opening level of the service should be expanded, and FDI should be led to communication,
tourism, environment protection, finance, trade, consulting, accounting, lawyer, information, advertising etc.
5.3. Bridging the Gap between the South Part and the Middle and North Parts
In the south part, the economic development level and opening degree are relatively higher. While in the middle
and the north parts, the economic development level and opening degree are lagging behind. Therefore, some
policies should be made to support the middle and the north parts. More effective policies should be made by the
middle and the north parts to widen their FDI fields, improve their investing environment, and industry match-
ing conditions. And the south part should continue to put FDI in high tech industries. All the three parts should
cooperate, coordinate and develop together, complement each other, and move FDI from the south to the middle
and north parts gradually.
5.4. Increasing Investment in R & D and Training R & D Personnel
With the advantage of high level personnel, Jiangsu should encourage foreign companies to establish R & D in-
stitutions in Jiangsu. By means of doing so, Jiangsu can benefit more directly and obtain advanced technology.
In the meantime, Jiangsu should invest more in R & D to train R & D personnel and improve R & D and inno-
vative competences.
5.5. Making Policies to Protect Environment
While using FDI, Jiangsu should strengthen to supervise the environment of the foreign enterprises, in particular,
S. Q. Liu, Y. X. Mei
the ones of manufacturing. Those enterprises of high energy consumption and high discharge should be con-
trolled. On the other hand, those enterprises of high tech, with high tech contents, should be encouraged in order
to develop the economy without damaging the environment quality.
5.6. Emphasizing the Quality but Not the Quantity of FDI
Based on scientific development laws, FDI in the mature industries should be restricted. Those with high tech
contents should be encouraged so as to maximize the profit of FDI use. The resource cluster, output effect and
environment effect should be used as the standards to use FDI and thus increase the sustainable development
6. Conclusion
SWOT method is adopted to analyze FDI utilization in Jiangsu Province. The findings show that the FDI in
Jiangsu should be led to the high tech industries gradually in order to make FDI promote the economic devel-
opment of Jiangsu effectively.
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