Nannan Lundin

Foreign Firms and Chinese Employment

This paper examines the effect of foreign direct investment (FDI) on employment in the Chinese manufacturing sector. As one of the worlds largest recipients of FDI, China has arguably benefited from foreign multinational enterprises in various respects. However, one of the main challenges for China, and other developing countries, is job creation, and the effect of FDI on employment is uncertain. The effect depends on the amount of jobs created within foreign firms as well as the effect of FDI on employment in domestic firms. We analyse FDI and employment in China using a large sample of manufacturing firms for the period 1998–2004. Our results show that FDI has positive effects on employment growth. The relatively high employment growth in foreign firms is associated with their firm characteristics and their high survival rate. Employment growth is also relatively high in private domestic Chinese firms. There also seems to be a positive indirect effect of FDI on employment in private domestically-owned firms, presumably caused by spillovers.

The Role of Small Firms in the Technology Development of China

Science & Technology (S&T) is high on the Chinese policy agenda and the country aims at becoming an innovation-driven economy. Small firms have been important in technology development in other East Asian countries but the situation in Chinese small firms has been far less explored. We examine how much S&T has been accounted for by small firms and how their S&T intensity differs across industries and ownership groups. We also analyse how various firm characteristics differ over size categories and S&T status. This study is based on newly processed micro-level data provided by the National Bureau of Statistics with information on a large number of S&T indicators for manufacturing firms in China in 2000 and 2004. Our results suggest that the role of small firms in Chinese S&T is similar to that in many other countries. They account for a comparably small share of total S&T and most small firms are not engaged in any S&T. However, those small firms that do engage in S&T tend to be more S&T intensive and have a higher output in terms of patents than larger Chinese S&T firms.

Foreign Firms and Indigenous Technology Development in the People's Republic of China

The Peoples Republic of China (PRC) is currently promoting indigenous technology development through support of Chinese firms and, arguably, by restricting operations of foreign multinational firms. This policy seems to overlook the impact of foreign firms on technology development in local firms. For instance, technology might leak out to local firms though spillovers. Moreover, competition from foreign firms might force local firms to engage in technology development. We examine the impact of foreign direct investment (FDI) on technology development in the PRC. We start by surveying a large and growing literature on FDI and spillovers in the country. Most previous studies find evidence of positive spillovers. We then continue to examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ research and development (R&D). Our analysis is conducted on a large dataset including all large- and medium-sized Chinese firms over the period 1998–2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D.

Will Science and Technology Solve China's Unemployment Problem?*

China needs a substantial growth of modern-sector employment to absorb its huge supply of underemployed people and new labor market entrants. The present crisis with its massive layoffs of workers makes the issue even more pressing. Although the government has announced large public investments to deal with the business cycle downturn, less attention has been paid to the structural aspects of Chinese underemployment. One exception is the recent emphasis of technology development. However, science and technology (S&T) can have both positive and negative effects on employment. Using information from a large sample of manufacturing firms in China between 1996 and 2004, we analyze how S&T affects employment. Our results suggest that S&T does not promote employment growth.