Foreign Direct Investment and Provincial National and Global Dual Value Chain Embedding——The Theoretical and Empirical Analysis under the New Development Paradigm

Foreign direct investment is crucial to the construction of a new pattern of development, with the domestic economy and international engagement providing mutual reinforcement, and the former as the mainstay. From the perspective of Marxist political economy theory and the development economics of large countries, this article analyzes the important role of foreign direct investment in unblocking the domestic general circulation and deepening the integration into the international external circulation system. In addition, this article reveals the characteristics of provincial national and international dual value chain linkages based on the decomposition data of the value added of trade in 30 provincial areas from 2007—2017, and further empirically examines the impact and mechanism of action of foreign direct investment on provincial national and international dual value chain embedding, as well as the moderating effects of institutional quality and informatization level. Firstly, the study finds that, overall, there is significant heterogeneity in the degree of embeddedness of provinces in national value chains and global value chains. The entry of foreign direct investment enhances the degree of national and international dual value chain embedding in provincial areas, and the entry of international capital promotes the construction and development of the domestic general cycle and at the same time promotes the value chain division of labor cooperation between domestic provinces and the international external cycle. Secondly, mechanistically, foreign direct investment entry promotes provincial linkages with global value chains mainly through competitive market effects and demonstration-driven effects, as well as enhancing provincial embedding in national value chains through external shock effects. Thirdly, the heterogeneity analysis shows that there are significant geographical differences between the East, Central and West in the impact of foreign capital entry on provincial national and global dual value chain linkages, and the promotion effect of foreign capital on provincial dual value chain linkages has been further enhanced after the “One Belt, One Road” initiative. Fourthly, further expanding the institutional and informational context analysis finds that the improvement of institutional quality and informational level positively moderates the effect of foreign direct investment on the provincial national and global dual value chain linkages. In addition, based on the dichotomy of institutional quality, there is a significant difference in the incentive intensity of the property rights regime and the contractual regime on the dual value chain linkage between foreign capital and the province.