Abstract: Because the classical FDI theory cannot explain completely the characteristics of Chinese economy depending severely upon foreign capital，this paper, in view of China’s particular institutional environment, constructs an analytical framework of environment-strategy-conduction-performance (ESCP), which examines the specific effects of FDI on industrial structure under the institutional constraints. It is found that the institutional constraints have brought non-typical characteristics to China’s FDI inflow, such as “too large scale, lower quality, too small project type, dispersed industries”, etc. which differs from those of other countries. Under the institutional constraints, China’s FDI inflows generally lack correlation effects, the positive spillover-effect is suppressed, the income-leakage effect and the structure-locking effect are highlighted，which go against the industrial growth and the advance process inside the industry. The policies of attracting foreign capitals in the new period must be based on the improvement of the institutional environment to attract high quality foreign capitals, so as to promote the optimization and upgrading of the industrial structure.

Key words: institution constraint; FDI; income-leakage effect; industry structure adjustment