Regional Marketization, OFDI, and Sustainable Employment

[Full title: Regional Marketization, OFDI, and Sustainable Employment: Empirical Analysis in China]

sustainability Article Regional Marketization, OFDI, and Sustainable Employment: Empirical Analysis in China Zhihua Ruan 1 , Wenhua Liu 2 , Sanggyun Na 1, *, Xianhua Tan 1 and Tianqiao Xue 1 1 School of Business Administration, Wonkwang University, 460 Iksandae-ro, Iksan, Jeonbuk 54538, Korea 2 School of Economic and Management, Yichun University, Yichun 336000, China * Correspondence: nsghy@wku.ac.kr Received: 2 July 2019; Accepted: 27 July 2019; Published: 29 July 2019 Abstract: To maintain sustainable development, the government’s macro control is very important, but the system construction of the market itself can’t be ignored. From the perspective of aggregate supply, OFDI (outward foreign direct investment) in developing countries can sustainably promote domestic employment through di ff erent kind of channels such as human capital, a reverse spillover of the international technology, and marketization processes. Based on 30 provincial panel data from 2005 to 2017, stating from the C–D production function, this article empirically estimates the total e ff ect and regional di ff erences in the e ff ect of OFDI on domestic employment in China by using the main approach of Sys-GMM. The results show that the promotion e ff ect of OFDI on domestic employment has an obvious lag; the faster the marketization process, the more significant the current period’s substitution e ff ect and the lagged period’s promotion e ff ect of OFDI on domestic employment. This means that it is a lagged-period process for OFDI to enhance total factor productivity and realize the e ff ective allocation of labor resources through various channels. Furthermore, whether the domestic promotion e ff ect of OFDI can be e ff ectively exerted is closely related to the process of domestic marketization. A good market system environment can e ff ectively improve the e ffi ciency of labor resources allocation, thus promoting the sustainable development of domestic employment. China’s market-oriented transformation has not yet been completed. The sustainable growth of China’s employment depends on further promoting a market-oriented economy. Therefore, it is suggested to accelerate the improvement of market mechanisms and related system construction, strengthen the role of the government in public service, and promote the coordinated development of OFDI and IFDI (inward foreign direct investment) in various regions to promote the sustainable development of employment Keywords: marketization process; OFDI; sustainable employment; regional di ff erence; Sys-GMM 1. Introduction The basic premise of sustainable employment is to pursue the sustainability of human survival and development ability, which aims at promoting sustainable and e ff ective employment creation of the whole society, continuously improving the quality of labor force and employment, and fully satisfying the employment development of workers. The fundamental goal is to achieve the e ff ective allocation of labor elements in the sustainable development system. With the development of international trade and investment, the allocation of production factors on a global scale will inevitably have an important impact on employment in various countries. China is a country with a large population, and employment has always been an important issue in Chinese social and economic development. From the perspective of the development process of international investment, a big foreign direct investment (FDI) absorber will gradually become a big source of foreign investment. China is a big country that has absorbed FDI for a long time. With the acceleration of China’s opening up process, more and more Sustainability 2019 , 11 , 4101; doi:10.3390 / su 11154101 www.mdpi.com / journal / sustainability

Sustainability 2019 , 11 , 4101 2 of 17 Chinese capital has entered the international market, and the proportion of China’s outward foreign direct investment (OFDI) in global foreign investment market is also growing. According to data in the hh Statistical communique of China’s OFDI in 2017 ii , China’s OFDI in 2017 was $158.29 billion, which ranked third in the world behind the United States ($342.27 billion) and Japan ($160.45 billion). The influence of China’s OFDI in global FDI (foreign direct investment) is constantly expanding Existing literature studies have focused on the impact of OFDI on home employment in developed countries such as Europe and the United States. However, there is not only a lack of relevant research on China, but also a controversy. The e ff ect of OFDI on home country employment is influenced by many factors, among which regional marketization plays an extremely important role. Since China itself is the largest developing country, with China’s opening to the outside world, there are also significant di ff erences in the development of regional marketization. In some areas of China, the process of marketization is faster, while in others, the process of marketization is slow However, there existing obvious di ff erence not only in the investment scale in various areas of China, but also in regional marketization, according to Wang Xiaolu ’s [ 1 ] reports. Then, with the gradual deepening of opening-up and market-oriented reform, what impact will China’s OFDI have on domestic sustainable employment? Is it a facilitation e ff ect or a substitution e ff ect? Are there significant di ff erences in the e ff ects of FDI on domestic sustainable employment in di ff erent regions of the marketization process? How can local governments further develop OFDI to expand the domestic employment scale and optimize the employment structure so as to realize the optimal allocation of domestic resources? Thinking about these issues is an important topic in current academic research and policy practice, which has certain theoretical and practical significance. Therefore, the purpose of this paper is to theoretically analyze the transmission channels of market-oriented factors in the e ff ect of OFDI on employment in home countries, and to empirically analyze the significant di ff erences in the impact of OFDI on sustainable employment in di ff erent regions with di ff erent market-oriented processes. Finally, on the basis of theoretical and empirical analysis, the paper will find out the corresponding countermeasures for local governments to make use of OFDI to expand the scale of domestic employment, optimize the employment structure, and realize the optimal allocation of domestic resources. The research process and conclusions of this paper are not only suitable for China, but also valuable for other developing countries, such as India, Brazil, and South Africa, which have the same marketization process as China 2. Literature Review 2.1. Researches on the E ff ect of OFDI on Employment in Home Country Early research on the e ff ect of OFDI on employment in the mother country mainly focused on the debate of the employment substitution e ff ect or the employment supplement e ff ect. Jasay [ 2 ] supported the employment substitution e ff ect; he thought that foreign direct investment would replace part of domestic investment and consumption in the home country of capital under the condition of limited resources if the money outflow did not decrease with the growth of exports or import, because the motherland employment can produce negative e ff ects or the substitution e ff ect. Following Jasay’s research, Hawkins [ 3 ] put forward an opinion on the basis of employment in e ff ect (complementary e ff ects) theory that foreign investment will supplement or promote domestic investment and consumption. This is particularly so in the case of defensive investment, in which the intention of enterprise investment abroad is to develop domestic resources or—due to tari ff barriers—hinder its export transverse to foreign investment. Then, this type of investment—which is often produced upon the homeland capital equipment—can increase foreign subsidiaries, intermediate products, or auxiliary products demand, so as to produce positive e ff ects on domestic employment Hamill [ 4 ] believed that the employment e ff ect of FDI in a multinational company’s home country is uncertain and unstable due to the di ff erent e ff ects of its adoption of standalone strategies, simplex integration strategies, and complex integration strategies on its employment in its home country.

Sustainability 2019 , 11 , 4101 3 of 17 Campbell [ 5 ] and UNCTAD [ 6 ] argued that the potential e ff ects of transnational corporations’ FDI on employment in their home countries included direct positive and negative e ff ects as well as indirect positive and negative e ff ects In recent years, scholars’ studies on OFDI’s employment e ff ect in China generally believe that the di ff erences in investment motivation or type, host country type, factor intensity, industry distribution of OFDI, and income level between host country and investment country should be taken into account. Braconier and Ekholm [ 7 ] believed that vertical OFDI locates the labor-intensive production stage in countries with low labor cost, while locating the capital and technology-intensive production stages in high-income countries. Vertical OFDI will promote the improvement of employment levels in home countries. However, in the current period, the migration of domestic production capital abroad may have a substitution e ff ect on employment in home countries. Horizontal OFDI is where multinational companies take full advantage of their monopoly advantage to arrange production in many countries in order to get more opportunities for overseas markets and economies of scale e ff ects. If the production of goods is tradable, the substitution e ff ect of employment may occur between parent companies and overseas branches because domestic exports will be replaced by foreign production. If the production of goods is non-tradable, such a substitution e ff ect of employment could not be produced Blomstrom et al. [ 8 ] studied the OFDI of the American manufacturing industry and showed that American multinational companies arranged labor-intensive production in subsidiaries of developing countries, which had a substitution e ff ect or negative e ff ect on domestic employment. The research on Sweden’s manufacturing OFDI suggests that Sweden has more overseas capital-intensive production arrangements, especially in the high-income countries. A complementary e ff ect or positive e ff ect on domestic employment may occur because the domestic parent company provides necessary ancillary services for foreign subsidiary production, in cases where the parent company maintains stable production. Other research results show that OFDI in countries with di ff erent factor endowments (income levels) has di ff erent substitution e ff ects on employment in the mother country. In other words, investment in low-income countries is more likely to produce substitution e ff ects on employment in the mother country than investment in high-income countries. For example, Brainard and Riker’s [ 9 ] study on the manufacturing industry in the United States showed that the establishment of subsidiaries in low-wage countries by multinational companies would have a strong substitution e ff ect on domestic employment in the United States, while the establishment of subsidiaries in other income-level countries would only have a moderate substitution e ff ect on domestic employment in the United States Due to the late start of China’s outward FDI, some domestic scholars, such as Luo Liangwen [ 10 ] have made a qualitative analysis of the domestic employment e ff ect of China’s OFDI on the basis of foreign theories. Basically, they believe that China’s outward FDI is at the initial stage, the degree of international integration is not high, and many investments are defensive. The current-period employment stimulation e ff ect of investment is obviously greater than the employment substitution e ff ect. For example, Jiang Yapeng and Wang Fei [ 11 ] used the time series data from 1981 to 2010 to perform a cointegration analysis, and concluded that the employment e ff ect of China’s home country of OFDI was generally positive. Zhang Jiangang et al. [ 12 ] used the panel data of 30 provinces (cities and districts) from 2003 to 2010, and the Sys-GMM method to empirically examine the impact of China’s OFDI on domestic employment. Regional di ff erences show that nationwide, OFDI has a greater e ff ect on employment creation than substitution. The e ff ect of OFDI on employment creation in the eastern region is greater than that of substitution, while the e ff ect of FDI in the western region is mainly substitution due to its late start. Zhang Haibo and Peng Xinmin [ 13 ] empirically studied the employment e ff ect of OFDI in di ff erent regions with di ff erent levels of economic development and education in China by using the panel data of 29 provinces (cities and districts) from 2003 to 2010 The results show that in general, OFDI has an alternative e ff ect on domestic employment, while in high-income areas, OFDI has an alternative e ff ect on domestic employment. OFDI in middle-income areas has an alternative e ff ect on domestic employment. In low-income areas, OFDI has no significant e ff ect on domestic employment. In high-education areas, OFDI has a supplementary e ff ect on domestic

Sustainability 2019 , 11 , 4101 4 of 17 employment, while in middle-education and low-education areas, OFDI has an alternative e ff ect on domestic employment 2.2. Research on Marketization Process and China’s Economic Development At present, relevant research studies on the marketization process and China’s economic development mainly cover three aspects. (1) The first is the marketization process index. Fan et al., [ 14 ], Zhao Wenjun, and Yu Jinping [ 15 ] traced the relative process of China’s regional marketization and comprehensively evaluated the progress of marketization from aspects of the relationship between the government and the market, the development of the product market, the factor market, and the organizational and legal system environment in the market. (2) The second is marketization process and economic growth. By referring to Wurgler’s capital allocation e ffi ciency estimation model, Zhang Haiyang [ 16 ] made an empirical analysis of the impact of China’s marketization process on capital allocation e ffi ciency. Zhang Haibo and Peng Xinmin quantitatively investigated the contribution of marketization reform to total factor productivity and economic growth by using the relative index of the marketization process in various provinces of China Jiang Yapeng and Wang Fei empirically analyzed the relationship between the marketization process and the mode of economic growth based on the panel data of provinces in China. Most scholars believe that China’s market-oriented reform has improved its total factor productivity and thus economic growth by improving the incentive mechanisms, enhancing product market competition, improving the factor markets, promoting technological progress, and promoting the development of the non-state economy. (3) The third aspect involves the marketization process, FDI inflow or trade export, and domestic technological innovation. Scholars such as Jiang dianchun and Zhang yu [ 17 ] introduced the marketization process into the empirical model and applied di ff erent empirical methods to reveal the impact of institutional changes on the process of China’s economic transition on domestic technological innovation brought by FDI inflow or trade export The above literatures laid a premise and foundation for an in-depth study of the domestic employment e ff ect of OFDI in the marketization process of countries in transition. However, it is a pity that few scholars have paid attention to the impact of institutional factors on the employment rate within the home country of OFDI. As a country in transition, China has a di ff erent institutional environment from those of developed countries. The impact of institutional factors alongside the e ff ect that OFDI has on employment within its home country cannot be ignored. The perfect market institutional environment is related to the specific relationship between OFDI and employment in its home country. However, it is worth noting that few scholars have paid attention to the impact of a country’s institutional factors on the employment e ff ect in the home country of OFDI. As a large developing country, China has 31 provincial-level administrative regions of considerable scale Although the macro-environment and political system are basically the same, there is an obvious imbalance in the marketization degree of each province and urban area. On the one hand, the expansion of OFDI in developing countries is conducive to accelerating the domestic marketization process and improving the total factor productivity and the allocation e ffi ciency of resources so as to increase domestic employment and output. On the other hand, a perfect market institutional environment is a necessary prerequisite for the e ff ective performance of OFDI’s domestic employment e ff ect. For countries or regions with di ff erent degrees of marketization, the e ff ects that OFDI has on employment in each home country are quite di ff erent Therefore, based on endogenous economic growth theory and from the perspective of macro supply, this paper first clarifies the impact mechanism of OFDI on domestic employment in the marketization process of countries in transition, especially the relationship between the marketization process, OFDI development, and OFDI’s domestic employment e ff ect. Secondly, by referring to the analysis methods of Greenaway et al. [ 18 ] and Milner et al. [ 19 ], an analysis framework of OFDI’s impact on domestic employment was constructed from the perspective of the C–D production function, and the overall e ff ect of China’s OFDI on domestic employment was empirically tested. In addition,

Sustainability 2019 , 11 , 4101 5 of 17 the mean value of the marketization relative index of Fan Gang and Wang Xiaolu et al. [ 20 ] was used to classify 31 provinces and cities in China so as to further empirically test the di ff erence of OFDI’s domestic employment e ff ect in di ff erent regions of China’s marketization process. It is expected to bring some enlightenment to the formulation and implementation of relevant policies 3. Mechanism, Model, and Data 3.1. The Transmission Mechanism of Marketization Process and OFDI Domestic Employment E ff ect The source of economic growth comes from the growth of factor input and the improvement of total factor productivity (TFP). Based on the theory of endogenous economic growth [ 21 ], this article argues that from the perspective of macro supply, the impact of OFDI on the employment and output of the mother country is not only reflected in the impact on the input quantity of factors (labor and capital, etc.), but more importantly on the total factor productivity, technological progress and innovation, and then on the e ffi ciency of resource allocation. Foreign direct investment in developing countries can accelerate the home country’s total factor productivity through (i) increasing human capital, (ii) the international technology reverse spillover e ff ect, (iii) upgrading the industrial structure, and (iv) the role of accelerated marketization channels to promote technological progress and improve the allocation e ffi ciency of labor resources and ultimately a ff ect domestic employment and output, as shown in Figure 1 . Figure 1. Transmission mechanism of marketization process and overseas foreign direct investment (OFDI)’s e ff ect on domestic employment in transitional countries (1) Channel of human capital promotion. At present, in the process of economic globalization, developing countries need lots of high-level professional talents that master international laws and regulations with an international perspective in their foreign direct investment cooperation, which encouraged developing countries and enterprises to increase their human capital investment, develop domestic education and vocational skills training, and cultivate international professional and technical personnel so as to meet the human capital needs of multinational companies. The improvement of human capital means improving the quality of the labor force, which further improves the production e ffi ciency or labor productivity of the whole society and promotes the increase of employment and output. At the same time, the improvement of labor skills also makes their employability continuously enhanced, and the industrial structure and employment structure of the whole society are optimized (2) Channel of international technology reverse spillover. OFDI, especially technology-seeking OFDI, is an important way for developing countries to obtain international technology reverse spillover The OFDI enterprises of developing countries obtain foreign advanced research and development

Sustainability 2019 , 11 , 4101 6 of 17 (R&D) resources and achievement by the use of a technology cluster absorption mechanism, an overseas competition mechanism, an R&D resources-sharing mechanism, and a two-way communication of technology mechanism. Then, the foreign advanced R&D resources spread to other relevant domestic enterprises and finally promote the domestic technology level of ascension, which a ff ects the domestic employment and output in developing countries [ 22 ]. In addition, since the technological progress and labor productivity of various industries and departments are unbalanced, the labor force will transfer among di ff erent industries and departments, and the employment trend of various industries and departments will change accordingly. It has been proved practically that employment in the primary industries was in decline, while those in the secondary and tertiary industries were in the upward trend since 1978’s reform and opening up (3) Channel of industrial structure’s upgrading. Under open economic conditions, the extraversion of a country’s industrial structure is increasingly obvious and evolves with the international flow of goods and capital. Developing countries’ OFDI cannot only expand the international market and participate in international competition, it can also obtain scarce and strategic resources, and advance foreign technology. Thus, it will change the allocation of resources and enhance production e ffi ciency in the home country, which leads to the reorganization of factors among industries in the home country and the improvement of total factor productivity. With the upgrading of industrial infrastructure and the improvement of total factor productivity, capital and technology will have a certain substitution e ff ect on labor, which will reduce the percentage of labor employment. The evolution of industrial infrastructure will lead to older industries obtaining technological upgrades and improvements to their processes, thus increasing the demand for highly skilled labor. Meanwhile, the strengthening of the tertiary industry and the emergence of new industries will also provide more new jobs (4) The role of the marketization process. Marketization plays a particularly important role in the process in which OFDI acts on total factor productivity through the above channels, which includes promoting technological progress and innovation, improving the e ffi ciency of labor resource allocation, and thus changing the transmission process of domestic employment and output. On the one hand, developing countries’ OFDI will accelerate the domestic market-oriented process in several ways. These include coordinating the relationship between the government and the market, promoting the development of the non-state economy, increasing the degree of marketization of the home country factor market and product market openness, speeding up cultivating market intermediary organizations, and promoting the construction of a domestic legal system. On the other hand, the improvement of marketization means that the market institutional environment required by open economic development has been improved, and the improvement of the market institutional environment will further promote the enterprises of developing countries to carry out foreign direct investment and improve open economic development At the same time, a good market environment will greatly benefit from the OFDI to improve the total factor productivity and promote technological innovation, thus improving the e ffi cient allocation of domestic labor resources through increasing human capital, reversing the spillover of international technology, and upgrading the industrial infrastructure. Finally, the quality of the labor force and employees’ abilities are enhanced, and the demands for skilled labor will be enlarged. The growth of the tertiary industry and new industries bring more new jobs, while there is a labor force transfer between industries and departments, in which some parts of the labor force are replaced by capital and technology Therefore, the market-oriented institutional environment is not only one of the important channels by which the OFDI promote domestic employment through promoting domestic technological innovation and improving the allocation e ffi ciency of labor resources, but also an important precondition for the development of OFDI and the e ff ective exertion of OFDI on domestic employment [ 23 ]. The impact of OFDI on domestic employment varies according to the degree of marketization.

Sustainability 2019 , 11 , 4101 7 of 17 3.2. Model In order to empirically investigate the overall e ff ect of China’s OFDI on domestic employment and the di ff erences in the e ff ect of OFDI on domestic employment in various regions with di ff erent marketization processes, this article uses the analytical method of Greenaway et al. [ 24 ] and Islam [ 25 ] for reference and establishes an extended dynamic regression model of labor demand on the basis of C–D production function Let the C–D production function be: Q it = A γ K α it L β it (1) Among them, i denotes the cross-section units (province, city, district), t denotes period (years), Q denotes real output, K denotes capital stock, L denotes labor input, α , β respectively denote the capital and labor output elastic coe ffi cients, A denotes the technical e ffi ciency a ff ecting output growth, and γ denotes the percentage of determinants of technical e ffi ciency. Under perfect competition conditions, the manufacturer that pursues profit maximization will make its marginal output of labor (MP) L ) equal to wages (w) and the marginal output of capital (MP K ) equal to the corresponding use cost (c), so the production function can be further expressed as: Q it = A γ " α L it β × w it c # α L β it (2) The labor demand equation of the manufacturer (or industry) can be obtained by rearranging the logarithm of Equation (2): ln L it = Φ 0 + Φ 1 ln ( w it / c ) + Φ 2 ln Q it + Φ 3 ln A (3) Among them, Φ 0 = − ( α ln α − α ln β ) / ( α + β ) , Φ 1 = − α / ( α + β ) , Φ 2 = 1/ ( α + β ) , and Φ 3 = − γ / ( α + β ) Assuming that the technical e ffi ciency parameter A in the production function changes with time and is related to the development level of OFDI and the penetration degree of inward foreign direct investment (IFDI), the technical e ffi ciency parameter A in the production function can be expressed as: A γ it = e δ 0 T i OFDI δ 1 it IFDI δ 2 it , δ 0 , δ 1 , δ 2 > 0, in which T denotes the time trend, OFDI denotes outward foreign direct investment, and IFDI denotes inward foreign direct investment. So, the labor demand equation is expanded as: ln L it = α 0 + α 1 ln ( w it / c ) + α 2 ln Q it + α 3 ln OFDI it + α 4 ln IFDI it + α 5 T i (4) For simplicity, let’s assume that capital price c is constant. Considering the dynamic adjustment process of labor demand in reality and the time delay of OFDI’s influence on technical e ffi ciency, the labor demand regression equation needs to be added to the lagging variables of labor demand and OFDI. Therefore, this article establishes a dynamic panel data regression model to investigate the overall e ff ect and regional di ff erence of China’s OFDI on domestic employment. The specific regression equation is: ln L it = β 0 + J P j = 1 β 1 j ln L it − j + J P j = 0 β 2 j ln OFDI it − j + J P j = 0 β 3 j ln IFDI it + β 4 ln w it + β 5 ln Q it + β 6 T i + λ i + µ it (5) In Equation (5), β 0 is a constant, β i denotes the regression coe ffi cient, λ i denotes the individual e ff ect, and µ it denotes a random perturbation term. The lag period of the OFDI variable is determined according to the significance of t statistics in the specific calculation process using actual data.

Sustainability 2019 , 11 , 4101 8 of 17 The variables involved in the regression in Equation (5) include: scale of employment (L), OFDI, IFDI, total output (Q), wage level (w), and time trend item (T). Among them, the unit employment in cities and towns (10,000 people) stands for employment scale (L). Real GDP (100 million yuan) stands for output (Q), and wages (w) are measured by average wage (RMB) per employee in cities and towns. To test the regression model robustness, OFDI and IFDI are substituted by OFDI flow ($10,000) and IFDI flow ($10,000), which are converted at the current exchange rates (average) into renminbi yuan, and the provincial urban fixed asset investment price index is used for the deflator (2004 = 100) Considering the availability of data, this article selects panel data of China’s 30 provinces from 2005 to 2017 (except for Tibet) to carry out the empirical research. All the data comes from China’s foreign direct investment statistical bulletin, China’s national statistics website (including the provincial city bureau of statistics website), China’s economic and social development statistical database, CEInet statistics database, etc. All of the above variables and indicators of statistical descriptions are shown in Table 1 . In order to reduce heteroskedasticity, all the variables in the regression of the model are expressed in the form of a natural logarithm except for OFDI and IFDI, which are due to the di ff erent selection of measurement indexes (see note in Table 2 ). Table 1. Statistical description of all variables and measures in the model. GDP: gross domestic product, IDFI: inward direct foreign investment, ODFI: outward direct foreign investment Variable Measure Observations Mean Standard Deviation Min Max Explained Variable L it Number of employees in urban units (ten thousand) 390 461.5 312.9 41.5 1982.3 Explanatory Variable OFDI it Percentage of OFDI in GDP (%) 390 0.2 0.5 0.0 5.7 OFDI flow (2004 = 1 million yuan) 390 3512327.0 887957.3 0.0 11300000.0 IFDI it Percentage of IFDI in GDP (%) 390 2.5 2.0 0.1 10.5 IFDI flow (2004 = 1 million yuan) 390 2918645.0 3376638.0 12319.4 15500000.0 Q it Real GDP (2004 = 10 billion yuan) 390 10015.5 9432.0 379.2 54356.7 W it Average salary of employees in urban units (yuan) 390 33756.6 17834.0 10407.0 111410.0 Table 2. Dynamic model estimation of the overall e ff ect of OFDI on domestic employment and its robustness test Variable Model I OFDI and IFDI are Measured by Their Respective Relative Amounts Model II OFDI and IFDI are Measured by Their Absolute Amounts Sys-GMM Dynamic Fixed E ff ect Sys-GMM Dynamic Fixed E ff ect L i t-1 0.6624 *** (0.000) 0.5873 *** (0.000) 0.7879 *** (0.000) 0.7598 *** (0.000) 0.6278 *** (0.000) 0.6061 *** (0.000) 0.7877 *** (0.000) 0.7631 *** (0.000) OFDI i t − 0.0130 *** (0.008) − 0.0140 *** (0.001) − 0.0132 (0.158) − 0.0140 (0.161) − 0.0032 * (0.055) − 0.0038 *** (0.006) 0.0030 (0.479) 0.0015 (0.723) OFDI i t-1 0.0439 ** (0.016) 0.0471 ** (0.001) 0.0267 * (0.061) 0.0224 (0.151) 0.0019 * (0.087) 0.0047 *** (0.002) 0.0047 (0.229) 0.0062 (0.181) OFDI i t-2 0.0520 *** (0.000) 0.0189 (0.257) 0.0034 ** (0.033) 0.0023 (0.597) IFDI i t − 0.0106 *** (0.000) − 0.0079 *** (0.000) − 0.0031 (0.423) − 0.0021 (0.648) − 0.0238 *** (0.000) − 0.0202 *** (0.000) 0.0025 (0.757) 0.0032 (0.751)

Sustainability 2019 , 11 , 4101 9 of 17 Table 2. Cont Variable Model I OFDI and IFDI are Measured by Their Respective Relative Amounts Model II OFDI and IFDI are Measured by Their Absolute Amounts Sys-GMM Dynamic Fixed E ff ect Sys-GMM Dynamic Fixed E ff ect IFDI i t-1 − 0.0039 ** (0.76) − 0.0071 ** (0.001) − 0.0043 * (0.671) − 0.0054 (0.458) − 0.0038 * (0.87) − 0.0067 *** (0.002) − 0.0045 (0.529) − 0.0062 (0.381) IFDI i t − 2 − 0.0060 *** (0.000) − 0.0246 (0.261) − 0.0054 ** (0.013) − 0.0226 (0.347) Q i t 0.2752 *** (0.000) 0.3169 *** (0.000) 0.1723 *** (0.010) 0.2129 *** (0.006) 0.3170 *** (0.000) 0.3196 *** (0.000) 0.1528 ** (0.024) 0.1809 ** (0.021) W i t − 0.1170 *** (0.000) − 0.1445 *** (0.000) − 0.0612 (0.285) − 0.0834 (0.239) − 0.1059 *** (0.000) − 0.1216 *** (0.000) − 0.0668 (0.246) − 0.0854 (0.204) T 0.0005 *** (0.000) 0.0006 *** (0.000) 0.0004 *** (0.000) 0.0005 *** (0.000) con 0.3876 *** (0.005) 0.4618 *** (0.003) 0.4672 *** (0.007) 0.5712 *** (0.008) Obs Groups 359 30 329 30 359 30 329 30 349 30 319 30 349 30 319 30 Adj R - squared 0.9152 0.9061 0.9123 0.9016 Hausman (P value) 0.0000 0.0000 0.0000 0.0000 Sargan (P value) 0.8869 0.4873 0.9041 0.8870 AR (1) AR (2) 0.0052 0.1254 0.0072 0.2459 0.0076 0.1788 0.0096 0.2461 *** p < 0.01, ** p < 0.05, * p < 0.1. OFDI and IFDI are respectively measured with their relative amounts (percentage of OFDI in GDP (%), percentage of IFDI in GDP (%)) in Model I and their own absolute (OFDI flow of real value, IFDI flow of real value) in Model II, and take the form of natural logarithms 4. Empirical Estimation and Result Analysis 4.1. The Overall E ff ect of China’s OFDI on Domestic Employment This article uses the relative and absolute values of the main explanatory variables OFDI and IFDI respectively for the regression estimation. The two methods used in the empirical research were the Sys-GMM method in the dynamic panel regression model estimation proposed by Blundell [ 26 ], and the dynamic fixed e ff ects method proposed by Datta and Agarwal. The regression estimation results of all the models are shown in Table 2 . From the test indicators of Sys-GMM estimation, all the Sys-GMM estimation results have passed Sargan and Arelano-Bond tests, indicating that the selection of tool variables for the model is reasonable, the residual sequence does not have a second-order autocorrelation, and the setting of the model is reasonable. Even though di ff erent measure indexes of OFDI and IFDI are adopted in models I and II, the regression results from the Sys-GMM and their dynamic fixed e ff ects are very similar. Overall, the model is robust and reliable The estimation results of the model I Sys-GMM for the country as a whole show that: (1) The previous employment had a positive e ff ect on the current employment at the significance level of 1%, and the regression coe ffi cient was about 0.6. The current output has a positive e ff ect on the current employment at a significance level of 1%, and the regression coe ffi cient is around 0.3. The current wage has a negative e ff ect on the current employment at the significance level of 1%, and the regression coe ffi cient is about –0.1. The regression coe ffi cient of T is positive at the significance level of 1%. The above results basically accord with the general law of the market economy.

Sustainability 2019 , 11 , 4101 10 of 17 (2) From the perspective of the regression coe ffi cient of IFDI, current IFDI has negative e ff ects on the current employment at the 1% significance level, and the regression coe ffi cient is about 0.01, which suggests that China’s FDI inflow has a certain crowding-out e ff ect on domestic employment According to the regression coe ffi cient of IFDI and its lagging term, both IFDI i t-1 and IFDI i t-2 have a negative e ff ect on current domestic employment at the significance levels of 5% and 1%, respectively This result is related to the transformation of China’s economic growth mode in recent years and the lagging development of the domestic labor market. With the development of China’s open economy entering an advanced stage, technological progress and innovation are becoming a new driving force for economic development. More and more labor-intensive IFDI are replaced by capital-intensive and technology-intensive IFDI. In addition to the structural rigidity of the domestic labor market, the inflow of capital-intensive and technology-intensive IFDI will inevitably have a certain impact on the employment of the low-skilled labor force in the current period (3) According to the regression coe ffi cient of OFDI and its lagging term, the current OFDI has a negative e ff ect on domestic employment in the current period at the significance level of 1%, and the regression coe ffi cient is about –0.01. Both OFDI i t-1 and OFDI i t-2 have a positive e ff ect on current domestic employment at the significance levels of 5% and 1%, respectively. This estimation result shows that China’s OFDI has an obvious hysteresis on the promotion e ff ect of domestic employment; that is, in the current period, OFDI has a certain degree of the substitution e ff ect on domestic employment, but in the lagged period, OFDI has a relatively obvious promotion e ff ect on domestic employment The possible explanation is that the promotion e ff ect of China’s OFDI on domestic employment has an obvious lag, and the lag e ff ect of one year has changed significantly from being a negative e ff ect to a positive e ff ect. The most direct explanation is that the response of employees is lagging behind. Generally, the training for employees in Chinese enterprises is mainly within a short period of one year. In order to adapt to new jobs, most employees receive short-term training to improve their employability in industrial infrastructure optimization. Thus, the e ff ect of OFDI on employment has changed from the substitution e ff ect in the current period to the promotion e ff ect in the lagging period With the implementation of China’s “one belt and one way” strategy, most of the outward direct investment of Chinese enterprises has gone to developing countries with abundant resources, wide markets, and low labor costs. In the current period, this “horizontal investment” mode will have a certain degree of substitution e ff ect on domestic employment. More importantly, it is a lagged-period process for OFDI to accelerate the process of marketization and act on total factor productivity, and ultimately form the promotion e ff ect on domestic employment through the channels such as capital upgrading, the reverse spillover of international technology, and the upgrading of industrial infrastructure. In this process, a perfect market system environment is the necessary prerequisite to determine whether the promotion e ff ect of OFDI on domestic employment can be e ff ectively exerted In the past 40 years of reform and opening up, the degree of marketization in China has been increasing, but there is still a big gap between China and the developed market economy. Especially due to the restrictions of the household registration system, housing, medical treatment, and children’s education, the structural rigidity of China’s labor market is still relatively large. Therefore, it hinders the rational flow and e ff ective allocation of domestic labor resources to a certain extent in the current period 4.2. Di ff erent E ff ects of OFDI on Domestic Employment in China’s Various Regions with Di ff erent Marketization Processes (1) Areas classified according to their marketization process in China The above-mentioned estimation of the overall employment e ff ect of China’s OFDI based on inter-provincial panel data assumes that market institutional factors are a unified variable, and temporarily ignores the impact of the di ff erent market institutional factors in di ff erent regions on the domestic employment e ff ect of OFDI Institutional factors are the core of development economics. To study the domestic employment e ff ect of OFDI in developing economies, the vertical changes and horizontal di ff erences of the system

Sustainability 2019 , 11 , 4101 11 of 17 cannot be ignored, and the process of marketization is particularly critical among all the institutional factors. Since the reform and opening up, the degree of marketization in China has been continuously improving, which had established the basic premise for the e ff ective exertion of the employment promotion e ff ect of OFDI to a certain extent. However, as a large country with a vast territory and covering 31 provincial administrative regions, China’s regional economic development is obviously unbalanced. There are also great di ff erences in the marketization processes of di ff erent regions. The low degree of marketization in some provinces has seriously hampered the role of OFDI in promoting domestic technological progress and innovation, and hindered the e ff ective exertion of the employment promotion e ff ect of OFDI. Source allocation e ffi ciency is relatively low For a long time, Chinese scholars Fan Gang and Wang Xiaolu have tracked and synthetically evaluated the relative process of regional marketization in China. They regard the construction of various aspects of the market system as a process of systematic development and gradual improvement. They established the index system of China’s provincial marketization process by taking the relationships between the government and markets, the development of the non-state economy, the development of product markets, the development of factor markets, and the development of organization and law in the market into consideration. This index system not only compares the marketization process of each province horizontally, but also achieves the basic comparability along the time series, thus providing a relatively complete set of panel data to measure the marketization process in di ff erent aspects. Based on the research results of Fan Gang et al. (2011) and Wang Xiaolu et al (2016), this paper ranks the market-oriented process of 31 provinces and municipalities by calculating the average of the relative index of the market-oriented process of each province and municipality in China from 2004 to 2015. The first 15 provinces and municipalities were designated as regions with faster market-oriented processes, and the last 15 (excluding Tibet) were designated as regions with slower market-oriented processes, as shown in Table 3 . Table 3. Division of Chinese provinces and cities from 2004 to 2015 by the index of marketization progress Regions with Relatively Faster Marketization Process Regions with Relatively Slower Marketization Process Provinces Marketization Index Provinces Marketization Index Provinces Marketization Index Provinces Marketization Index Zhe jiang 10.00 Shandong 7.88 Hunan 6.36 Yunnan 5.19 Shanghai 9.66 Liao ning 7.36 Hebei 6.32 Shaanxi 4.93 Jiang su 9.50 Chongqin 7.18 Ji Lin 6.08 Ning xia 4.91 Guang dong 9.33 Ann hui 6.18 Guangxi 5.76 Guizhou 4.67 Beijing 8.60 Henan 6.71 Hainan 5.66 Xinjiang 4.34 Tianjin 8.31 Sichuan 6.64 Heilongjiang 5.55 Gansu 4.17 Fujian 8.10 Hubei 6.61 Neimenggu 5.40 Qinghai 3.00 Jiangxi 6.41 Shanxi 5.33 Tibet 0.74 Data source: Fan Gang, Wang Xiaolu, Zhu Hengpeng. 2011. China’s marketization index – the relative progress of marketization in various regions 2011 report [M]. Wang xiaolu, Yu Wenjing, Fan Gang. 14 April 2016. China’s marketization process report [N]. Eight years financial magazine http: // finance.qq.com / a / 20160414 / 041777.htm . (2) Analysis of the impact of OFDI on employment in China’s various regions with di ff erent marketization processes In the following part, the Sys-GMM method is used to empirically estimate the di ff erent domestic employment e ff ects that OFDI has had in regions in di ff erent stages of China’s marketization process In the dynamic regression process of the overall e ff ect of OFDI on domestic employment, the absolute and relative variables of OFDI and IFDI have had little influence on the regression results, but if we want to further study the regional di ff erences of the employment e ff ect of OFDI, the regression

Sustainability 2019 , 11 , 4101 12 of 17 results will be di ff erent. The empirical results of this paper show that the estimation results of OFDI and IFDI variables using their respective relative quantities as measurement indicators will be more significant, because China has a vast territory, the regional economic scale of provinces and cities varies greatly, the adoption of relative quantities can better reflect the development level and penetration degree of regional international direct investment, and the comparability is stronger. For this reason, in the following empirical analysis, both OFDI and IFDI variables adopt their respective relative quantities as measurement indicators. The theoretical relationship between marketization and OFDI is potentially endogenous; OFDI may enhance the process of marketization, but those regions with greater marketization may also be more likely to be the source of OFDI. In order to eliminate this endogeneity, the lag variable tool of dependent variable is adopted in this study. The empirical estimates and test results are shown in Table 4 . The p values of the Sargan and Allano-Bond estimates are tested, and the regression model is reasonable and reliable Table 4. Sys -GMM estimation and test of OFDI’s regional e ff ect on domestic employment Variable L i t-1 National Aggregate E ff ect Regions with Relatively Faster Marketization Process Regions with Relatively Slower Marketization Process 0.6624 *** (0.000) 0.5873 *** (0.000) 0.6286 *** (0.000) 0.5623 *** (0.000) 0.6917 *** (0.000) 0.5985 *** (0.000) OFDI i t − 0.0130 *** (0.008) − 0.0140 *** (0.001) − 0.0435 *** (0.000) 0.0386 *** (0.000) − 0.0047 (0.442) 0.0079 (0.179) OFDI i t-1 0.0439 ** (0.016) 0.0471 ** (0.001) 0.1203 *** (0.000) 0.1184 *** (0.000) 0.0198 (0.335) 0.0287 ** (0.025) OFDI i t-2 0.0520 *** (0.000) 0.0595 (0.142) 0.0313 *** (0.000) IFDI i t − 0.0106 *** (0.000) − 0.0079 *** (0.000) − 0.0099 ** (0.027) − 0.0104 * (0.098) − 0.0007 (0.769) 0.0106 * (0.087) IFDI i t-1 − 0.0039 ** (0.76) − 0.0071 ** (0.001) − 0.0061 *** (0.000) 0.0354 *** (0.000) − 0.0018 (0.003) − 0.0041 ** (0.005) IFDI i t-2 − 0.0060 *** (0.000) − 0.0062 (0.463) − 0.0023 *** (0.352) Q i t 0.2752 *** (0.000) 0.3169 *** (0.000) 0.4269 (0.142) 0.5132 * (0.083) 0.2801 *** (0.000) 0.3563 *** (0.000) W i t − 0.1170 *** (0.000) − 0.1445 *** (0.000) − 0.1400 (0.314) − 0.2296 (0.115) − 0.1531 ** (0.015) − 0.2057 *** (0.005) T 0.0005 *** (0.000) 0.0006 *** (0.000) − 0.0101 (0.688) − 0.0058 (0.793) 0.0005 *** (0.000) 0.0013 (0.886) Obs Groups 359 30 329 30 179 15 164 15 180 15 165 15 Sargan (P value) 0.8869 0.4873 0.9013 0.8275 0.8688 0.8529 AR (1) AR (2) 0.0052 0.1254 0.0072 0.2459 0.0232 0.5845 0.0283 0.6874 0.0135 0.2638 0.0265 0.3234 *** p < 0.01, ** p < 0.05, * p < 0.1. OFDI and IFDI are respectively measured with their relative amounts (Percentage of OFDI in GDP (%), percentage of IFDI in GDP (%)). Other variables are all in the form of natural logarithms (3) Robustness test of model This paper uses Sys-GMM model to test the dynamic e ff ects of OFDI on employment in regions in di ff erent stages of the marketization process in China, but the conclusion of the model needs to be further tested by robustness. For this reason, this study uses national GDP instead of the local

Sustainability 2019 , 11 , 4101 13 of 17 output variable GDP in the robustness test of the model. The regression analysis of the key influence coe ffi cient in the model is carried out with the same form and regression method. The test results are shown in Table 5 . Table 5. Robustness test results of the Sys-GMM model Variable L i t-1 National Aggregate E ff ect Regions with Relatively Faster Marketization Process Regions with Relatively Slower Marketization Process 0.6579 *** (0.000) 0.5693 *** (0.000) 0.5736 *** (0.000) 0.5715 *** (0.000) 0.6852 *** (0.000) 0.5873 *** (0.000) OFDI i t − 0.0127 *** (0.007) − 0.0138 *** (0.001) − 0.0421 *** (0.000) − 0.0365 *** (0.000) − 0.0041 (0.369) 0.0068 (0.156) OFDI i t-1 0.0421 ** (0.012) 0.0462 ** (0.001) 0.1214 *** (0.000) 0.1029 *** (0.000) 0.0167 (0.321) 0.0269 ** (0.031) OFDI i t-2 0.0512 *** (0.000) 0.0587 (0.135) 0.0309 *** (0.000) IFDI i t − 0.0121 *** (0.000) − 0.0056 *** (0.000) − 0.0078 ** (0.024) − 0.0121 * (0.079) − 0.0006 (0.706) 0.01136 * (0.092) IFDI i t-1 − 0.0041 ** (0.81) − 0.0074 ** (0.001) − 0.0057 *** (0.000) − 0.0367 *** (0.000) − 0.0017 (0.004) − 0.0037 ** (0.005) IFDI i t-2 − 0.0057 *** (0.000) − 0.0058 (0.383) − 0.0028 *** (0.349) Q i t 0.2689 *** (0.000) 0.3231 *** (0.000) 0.4308 (0.135) 0.5262 * (0.079) 0.2762 *** (0.000) 0.3483 *** (0.000) W i t − 0.1230 *** (0.000) − 0.1396 *** (0.000) − 0.1320 (0.325) − 0.2356 (0.123 − 0.1481 ** (0.012) − 0.2127 *** (0.005) T 0.0007 *** (0.000) 0.0006 *** (0.000) − 0.0112 (0.718) − 0.0062 (0.785) 0.0006 *** (0.000) 0.0016 (0.879) Obs Groups 359 30 329 30 179 15 164 15 180 15 165 15 Sargan (P value) 0.7945 0.4792 0.8723 0.7934 0.7983 0.8613 AR (1) AR (2) 0.0049 0.1314 0.0069 0.2512 0.0241 0.5793 0.0279 0.6795 0.0141 0.2794 0.0271 0.3251 *** p < 0.01, ** p < 0.05, * p < 0.1. OFDI and IFDI are respectively measured with their relative amounts (percentage of OFDI in GDP (%), percentage of IFDI in GDP (%)). Other variables are all in the form of natural logarithms The results of the robustness test show that all the influence coe ffi cients of the model are not only close to the original values, but also pass the significance test after the local output variable GDP is replaced by the national GDP. The test results are consistent with the previous analysis conclusions, which verifies that the test conclusions of the model are robust and reliable 4.3. Discussion From the regression coe ffi cient of IFDI, there are also significant di ff erences in the impact of IFDI on domestic employment in di ff erent regions of the marketization process: FDI has a certain crowding-out e ff ect on domestic employment in regions with higher marketization degrees, while in regions with lower marketization degrees, the crowding-out e ff ect of FDI on domestic employment is not obvious or has a certain promotion e ff ect. This is because labor-intensive IFDI has been replaced by capital-intensive and technology-intensive IFDI in relatively high degree of marketization, while labor-intensive IFDI still accounts for a considerable proportion in relatively backward areas, which has played a positive role in promoting local economic growth and employment.

Sustainability 2019 , 11 , 4101 14 of 17 From the regression coe ffi cient of w, the e ff ect of wage on employment is negative. The e ff ect of wage on employment is not significant in the regions with a fast marketization process, but the e ff ect of wage on employment is significant in the regions with a slow marketization process. Since abundant labor resources and low wage levels are the main advantages of developing labor-intensive industries in provinces and cities with lower marketization, and lower wage cost is the basic prerequisite for enterprises to maintain production and employment; while in provinces and cities with higher marketization level, talents, technology and innovation are the foundation of enterprises. A higher wage level is an important guarantee to promote human capital, production, and employment The regression results of OFDI and its lagged items show that the dynamic e ff ects of OFDI on domestic employment are obviously di ff erent in various regions with di ff erent marketization processes For the regions with a relatively faster marketization process, the current OFDI had a negative e ff ect on employment at the 1% significance level, and the regression coe ffi cient was around 0.04; OFDI i t-1 had a positive e ff ect on employment at the 1% significance level, and the regression coe ffi cient was about 0.12; and OFDI i t-2 had no significant impact on the current employment. For the regions with a relatively slower marketization process, the influence of OFDI on current employment is not significant. OFDI i t-1 has a positive e ff ect on current employment at the significance level of 5% at most, and the regression coe ffi cient is about 0.03. OFDI i t-2 has a positive e ff ect on current employment at the significance level of 1%, and the regression coe ffi cient is about 0.03. This means that OFDI has an obvious substitution e ff ect in the current period and a promotion e ff ect in the lagged period on employment in regions where the marketization processes are faster. However, OFDI has no significant impact in the current period, and a certain promoting e ff ect in the lagged period on domestic employment in regions with slower marketization processes. This result further indicates that the marketization process is an important factor a ff ecting the development of China’s OFDI and the realization of OFDI’s domestic employment promotion e ff ect. A good market institutional environment can e ff ectively improve the e ffi ciency of resource allocation, thus promoting domestic employment and output Realistic data show that the development scale of OFDI in provinces and municipalities with faster marketization processes is also larger. According to the data in the Statistical Bulletin of China’s Foreign Direct Investment in 2017, the total OFDI tra ffi c in regions with relatively fast marketization processes in 2017 was 87.294 billion US dollars, accounting for 69.6% of China’s total OFDI tra ffi c Meanwhile, in regions with relatively slow marketization processes (excluding Tibet), the total OFDI tra ffi c in regions was 16.321 billion US dollars, accounting for only 14.4% of China’s total OFDI tra ffi c The acceleration of market-oriented processes is conducive to the vigorous development of OFDI, especially for private enterprises to “go out”, and the expansion of OFDI scale will in turn accelerate the domestic market-oriented process, thus forming a virtuous circle. With the deepening of China’s market-oriented reform and the transformation and upgrading of the open economy, the e ff ects of OFDI on promoting domestic total factor productivity, promoting technological progress and innovation, and e ff ectively promoting domestic employment through various channels will gradually be reflected This further illustrates that a good market environment promotes technological innovation, so as to improve the e ff ective allocation of domestic labor resources by increasing human capital and reversing international technology spillover. A good market environment can also optimize the industrial structure, improve the quality of the labor force and employee capacity, expand the demand for a skilled labor force, and ultimately promote the sustainable development of employment 5. Conclusions and Suggestions Large-scale OFDI in developing countries will have an important impact on their employment Starting from the C–D production function, this article uses the Sys-GMM method to empirically test the overall e ff ect of China’s OFDI on domestic employment and the dynamic e ff ect of OFDI on domestic employment in regions with di ff erent marketization processes based on the panel data of 30 provinces and cities in China from 2005 to 2017. The main conclusions are as follows.

Sustainability 2019 , 11 , 4101 15 of 17 From the perspective of the whole country, the promotion e ff ect of China’s OFDI on domestic employment is obviously lagging behind. OFDI has a certain degree of substitution e ff ect in the current period, but there is a relatively obvious promotion e ff ect on domestic employment in the lagged period Whether the domestic promotion e ff ect of OFDI can be e ff ectively exerted is closely related to the domestic marketization process. The institutional environment of China’s domestic market has been gradually improved since the reform and opening-up time, but there is still a big gap between China and developed market economies, especially in the rigid structure of the labor market, which hinders the reasonable flow and e ff ective allocation of domestic labor resources to some extent From the perspective of di ff erent regions, the domestic employment e ff ect of China’s OFDI is obviously di ff erent. In regions where the marketization process is faster, OFDI has an obvious substitution e ff ect in the current period and an obvious promotion e ff ect in the lagged period on domestic employment. In regions with slower marketization processes, OFDI has no significant impact in the current period, but a relatively small promoting e ff ect in the lagged period on domestic employment. This result further indicates that the marketization process is an important factor a ff ecting both the development of OFDI and the e ff ect of OFDI on domestic employment. A good market institutional environment can e ff ectively improve the allocation e ffi ciency of labor resources, thus playing a positive role in domestic employment. China is a large developing country and the development of regional marketization is uneven. Therefore, the Chinese government needs to improve the market mechanisms and related systems in di ff erent regions Comparing with the existing literature, we find the following. Firstly, this paper verifies that China’s OFDI has an alternative and complementary e ff ect on employment. At the same time, the conclusions in high-income areas are consistent. At the same time, this paper also draws a distinct conclusion that the e ff ect of China’s OFDI on employment is not a substitute or supplementary e ff ect with easy answers, but rather one that involves lag and regional di ff erences. It is only through considering this lag and di ff erence that we can better understand the significance of China’s OFDI for the sustainable development of domestic employment, and grasp the practical value of marketization for China’s OFDI and sustainable employment In order for China’s OFDI to better promote domestic employment, the following suggestions are put forward in the light of the above conclusions: Firstly, China should accelerate the improvement of its market mechanisms and related infrastructure construction. While promoting Chinese enterprises to “go abroad” and expand foreign direct investment, China should further reform the domestic market economic system, reduce excessive government intervention in the economy, foster the development of the non-state economy, expand the openness of product markets, improve the liquidity of factor markets, cultivate and build a complete intermediary service network, and improve the legal environment of market operation. As soon as possible, China should create a good market system environment for the e ff ective exertion of the employment promotion e ff ect of OFDI Second, there needs to be more support for the government’s public service function. The government should give more financial support in relation to a ff ordable housing, urban and rural medical care, basic education, etc., to help people choose jobs and reduce the structural rigidity of the labor market. The government should also increase investment in vocational education, strengthen the vocational skills training of workers, improve the quality of human capital, while also meeting the high expectations of multinational enterprises in the current period. In the long run, the demand for skilled labor and international talents can improve the ability of domestic technology absorption and transformation. At the same time, the government should create a public platform for scientific research services, and guide and promote enterprises to increase investment in scientific research and development, so as to enhance the ability of domestic independent innovation Third, in order to promote the coordinated development of OFDI and IFDI in all regions, local governments should formulate relevant incentive policies according to their own economic structure characteristics, and combine OFDI with IFDI appropriately. For regions with high levels of economic

Sustainability 2019 , 11 , 4101 16 of 17 development and high degrees of marketization, more e ff orts can be made to encourage large-scale foreign direct investment by enterprises. In particular, powerful multinational enterprises should be encouraged to integrate the global industrial chain and guide more capital and technology-intensive OFDI to develop vertical investment in developed countries in order to speed up the absorption and feedback of advanced technology and enhance their R&D and innovation capabilities. At the same time, attention should be paid to the introduction of capital and technology-intensive FDI in order to accelerate the adjustment of the domestic economic structure. For regions with low levels of economic development and low degrees of marketization, enterprises should not go abroad too fast. On the contrary, there is still great potential to develop local superior industries by reasonably introducing foreign capital. In addition, the government should also give more support and development space to domestic small and medium-sized enterprises (SMEs) in policy to help them absorb more labor and employment Author Contributions: Conceptualization, Z.R..; Data curation, W.L.; Formal analysis, Z.R.; Investigation, X.T., T.X.; Methodology, S.N.; Supervision, S.N.; Writing – original draft, Z.R.; Writing – review & editing, Z.R., W.L Funding: This work was supported by the Projects of Social Science Planning in Fujian Province in 2017 [Grant No. FJ 2018 MGCA 021] Acknowledgments: This paper was supported by Wonkwang University in 2019 Conflicts of Interest: The authors declare no conflict of interest References 1 Wang, X.; Yu, W.; Fan, G. China’s Marketization Process Report. Eight Years Financial Magazine. Available online: http: // finance.qq.com / a / 20160414 / 041777.htm (accessed on 14 April 2016) 2 Jasay, A.E. The Social Choice between Home and Oversea Investment Econ. J 1960 , 70 , 105–113. [ CrossRef ] 3 Hawkins, R.G Job Displacement and Multinational Firm: A Methodological Review ; Occasional Paper, No. 3; Center for Multinational Studies: Washington, DC, USA, 1972 4 Hamill, J. Employment E ff ect of Changing Multinational Strategies in Europe Eur. Manag. J 1992 , 10 , 334–340. [ CrossRef ] 5 Campbell, D. Foreign Investment, Labor Immobility and the Quality of Employment Int. Labor Rev 1994 , 133 , 85–204 6 UNCTAD World Investment Report 1994: Transnational Corporations, Employment and the Workplace ; United Nations: Geneva, Switzerland, 1994 7 Braconier, H.; Ekholm, K Swedish Multinationals and Competition from High and Low-wage Countries ; CEPR Discussion Paper, No. 2323; CEPR Discussion: Washington, DC, USA, 1999 8 Blomstrom, M.; Fors, G.; Lipsey, R.E Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden ; NBER Working Paper, No. 6205; NBER: Cambridge, MA, USA, 1997 9 Brainard, S.L.; Riker, D Are U.S. Multinationals Exporting U.S. Jobs? NBER Working Paper, No. 5958; NBER: Cambridge, MA, USA, 1997 10 Luo, L. Employment E ff ect of FDI: Theory and Empirical Study of China J. Cent. South Univ. Financ. Econ Law 2007 , 5 , 87–91 11 Jiang, Y.; Wang, F. Regional Di ff erence Analysis of the Employment E ff ect of the Home Country of China’s Foreign Direct Investment Shanghai Econ. Res 2012 , 7 , 43–53 12 Zhang, J.; Kang, H.; Kang, Y. Employment Creation or Employment Substitution: A Study on the Location Di ff erence of the Impact of OFDI on Employment in China Popul. Resour. Environ. China 2013 , 1 , 126–131 13 Zhang, H.; Peng, X. The Employment E ff ect of ODI on China: An Empirical Study Based on Dynamic Panel Data Model Financ. Trade Econ 2013 , 1 , 101–111 14 Fan, G.; Wang, X.; Zhu, H China’s Marketization Index—the Relative Progress of Marketization in Various Regions 2011 Report ; Economic Science Publishing House: Beijing, China, 2011; pp. 245–251 15 Zhao, W.; Yu, J. Marketization Process and China’s Economic Growth Mode: An Empirical Study Based on Provincial Panel Data Nankai Econ. Res 2014 , 3 , 3–22.

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