Spillover effects and extruding effect of FDI have been an argument focus in academic field. By using the panel data of 39 industries in 31 provinces and municipalities of China and by using China’s foreign enterprises and competition analysis framework of the foreign enterprises, the analysis indicates that China’s foreign enterprises have positive spillover effect on China’s domestic enterprises but are not main factor for the development of the domestic enterprises, that the higher the market synergism and resources similarity between the domestic enterprises and the foreign enterprises are, the lower the spillover effect is and the bigger the extruding effect is, and that spillover effect is probably smaller than extruding effect. Thus, China’s enterprises still need to consolidate technical innovation to improve capital operating efficiency and labor production efficiency, give up imitating strategy, develop different products and brands, and reasonably guide FDI in the proper regions and proper industries, so as to create virtuous environment for the foreign enterprises and the domestic enterprises to appropriately compete and learn from each other.