Abstract: Using the data of Chinese industrial enterprises from 1998 to 2013, this paper empirically studies the impact of foreign investment on the unit labor cost of Chinese local enterprises. The results show that the rising intensity of foreign investment has significantly pushed up the unit labor cost of Chinese manufacturing enterprises. On the one hand, it is due to the positive wage spillover effect brought by the rising intensity of foreign investment, which has pushed up the per capita wage of Chinese manufacturing enterprises; On the other hand, due to the rising intensity of foreign investment, the negative technology crowding out effect brought by the two mechanisms of product market share crowding and labor market competition has reduced the per capita output value of Chinese manufacturing enterprises. Therefore, China urgently needs to change the mode of introducing foreign capital to avoid damage to the competitiveness of local manufacturing enterprises.
