Research On The Function Of Foreign Direct Investment In China's Economic Growth

The function of Foreign Direct Investment (FDI) in host country's economic growth has always been important in modern economic growth theory. As an important way of international capital flow, FDI plays an important role in one country's economic growth and the conduction of international economic fluctuation. At present, main international financial institutions and economic organizations all have the statistics and specific researches on FDI. FDI theory is elaborated in Macroeconomics and Investment Theory, empirical researches of FDI's impacts and performance have also been improved a lot, the economic proofs of FDI's performance are found and special empirical methods are also developed. The dissertation researches the impact of FDI on the economic growth of China statistically and empirically, using the method of theoretical and experimental analyzes, theoretical assumption and empirical test, comparison and generalization analyzes, logical study and statistic simulation. The dissertation tries to get the revelation for China's economic policy and makes policy suggestions.First, main issues of the research are clarified, and the effects of the researches on economic forecast and analyze are introduced. Second, the impact mechanism of FDI on China's trans-provincial economic growth and the generation mechanism of the demand for FDI are depicted and analyzed, FDI's"technology spill over effect"on China's industry structure and the"crowding out effect"on domestic investment are researched, the performance of FDI is measured and tested, the causal relation between FDI and domestic production is analyzed and described. In the end, literature review of the above three issues are made.Based on the combination of theoretical study, policy research and empirical evidences, some theoretical assumptions and"Stylized facts"can be concluded. The dissertation contains six chapters. The main contents are as follows.First, the dissertation analyzes the theoretical model of FDI's generation mechanism and impact mechanism from the perspective of micro-level of FDI's demand, and mainly introduces the theoretical assumption of FDI's emergence, the comparative advantage theory, the technology advancement theory, and the resource and market model of FDI. Then, literature review of FDI is made.Second, the economy of China develops fast with less fluctuation, and the business cycle is getting indistinct and weakened. The fluctuation of macro economy deeply emerges with long term economic growth. The growth rate of China's economy mainly depends on the growth rate of domestic investment. The fluctuation of investment is extremely important in economic fluctuation. Domestic investment which has the most closed relation with FDI is the key point of research in chapter 3. In this chapter, the inter-action between domestic and foreign investment is examined. The dissertation measures and describes the business cycle and fluctuation of China's domestic investment, analyzes the main reasons of the fluctuation, and researches the inter-relations between FDI and domestic investment using Granger model. The dissertation also describes and tests the fluctuation mechanism of FDI and domestic investment using Heteroscedasticity model, which enriches the empirical proof of FDI's"crowding out effect"or"crowding in effect"on domestic investment. In the end, the performance of FDI and domestic investment is compared, and the"crowding out effect"of FDI on China's domestic investment is analyzed. From the tests, it can be easily found that the rate of return of FDI is much higher than that of domestic investment in China, and the transfer of international capital which are mainly caused by FDI among high capital return areas is the important proof of the convergence of economic development. Simultaneously, enterprises which receive FDI have advantages in technology and products, they can get monopoly revenue through market pricing, which is the pre-condition of the"technology spill over effect". Third, the direction of FDI capitals depends on the international capital flow, and the inter-action between FDI and deposits of host country can be confliction . In the beginning of the fourth chapter, the relation of China's domestic deposit and international capital flow is analyzed. On the one hand, the international capital inflows can be supplement of the domestic investment; on the other hand, it can crowd out the host country's domestic deposit and has crowding out effects on domestic investment. Then, the impacts of domestic deposit on international investment and FDI are tested. The direction and amount of international capital flow has profound impacts on one country's economic development. Further more, the dissertation analyzes the interaction between FDI and international capital flow, describes and analyzes the relation of exchange rate and FDI by constructing the exchange rate variable model. Because the production factors of FDI have close relations with international capital flow and international trade, the description and research of the impacts of exchange rate fluctuations on FDI is of great importance.Fourth, FDI in China grows rapidly since the adoption of the"Reform and Open Policy", and FDI has far-reaching impacts on China's economic development. The imbalance development of different districts in China not only causes the distortion of investment among provinces, but also makes the location of FDI centralized. The dissertation analyzes the impacts of FDI on China's provincial economic development using panel data model with data of 30 provinces in China.