The Location & Path Dependence Of FDI In China And The Regional Economic Growth

Since the policy the reform and opening to the world the eastern China has developed quickly with the help of preferential policy and regional advantages , but the middle and west China develop slowly. The paper has analysed the uneven location and path dependance of FDI as well as the economic effects of FDI to the western China and Shanxi Province. The FDI location can be explained by the geographic factor and policy, the eastern China has has attracted lots of FDI. With the accumulation of FDI the economic agglomoration must be used to explain FDI location besides geography and policy. The history of economic development has showed that the exploration of economic acctivites has the geographical centeral dots. The economic acctivites locate unevenly, there is great regional disparity in China ,lots of FDI in the eastern China has enlarged the regional disparity. Such tendency affected the balanced development of ecconomy , which concerns social stability and the life of people . To reduce the regional disparity is the basis of developing economy harmoniously , which has the theoretical and practical significance.This paper has synthetically used the inductive method and the deductive method, on the basis of summing up the theory of location and FDI location it firstly analyses the regional and industrialtraits of FDI in China. Moreover the paper has deeply studied the development and economic effect of FDI. Secondly it points out the economic spatial structure of High East and Low West reduced by the FDI location in China, the reasons for which lie in the ratio of capital formation and TFP. Lastly it has analysed the FDI location in the western China and Shanxi Province , the western area has the potent advantages to form the Pole of Growth, so the western area should construct the infrastructure and the innovation ability of the native companies to attract FDI.The theoratical basis of this paper includes regional economy , geographic economy and the theories of international direct investment , using which to analyse the location and econamic effects of FDI in China. The essence of FDI means the tranfer and disfusion of transnational companies. During the course of the location of FDI had not influenced the efficiency of transnational companies, but also have an effect on the regional economy. On the basis of the pursuit of profit FDIoffen chooses the optimum location, although which changes with the external envionment. Among the factors concerning the FDI location there are two important factors such as geography and policy. Besides the geographic factors and policy, the traits of economic activities has affected FDI location , which means the agglomoration of economic activities. The reasons for the FDI agglomoration in the eastern China includes the advantages of economy , manpower, market and technology. In addition the path dependance of FDI means the industrial agglomoration . So the western China should develop the intensibale model of economic growth using the FDI flow, enhancing the ability of absorbing and transforming FDI of the native enterprises.This paper includes the following seven parts, the first part is the preface which includes the background and significance , the concrete method , structure and conclusions of research, the second part has induced the development of theory of location and whose application to the FDI; the third section has discussed the disparity of FDI location between the Eastern and Western zone in China and the path dependance characteristics of FDI location; the fourth part includes division and regional difference ofFDI in China; as well as how which influences the economic space structure of China; the fifth section has discussed the effect of FDI to the regional economy in China, such as to the promotion of economic growth, trade creation and the technical spill-overing; the sixth part has taken the economy of Shanxi Province to analyse the influence of FDI to the development of regional economy, the last section concerns the brief conclusion of this paper and the problem to be discussed.The innovation of this paper embodies the analysis of FDI location, the spatial structure and its effects on the regional economy with the synthesis of Regional Economics, Geographical Economics and International Economics as well as Developing Economics. In addition , the current theoretical system of International Direct Investment has based on the economy of the developed countries, which is defective and on some degree to explain the FDI location and its effects in China. The inherent economic characteristics in China are in face the crucial factors to influence the FDI location , such as the domestic geographical and spatial characteristics, the economical macro-polices etc. The unbalanced spatial situation of FDI in China is not enough to be explained by the cost of transportation. This paper has discussed the reasons for the unequilibrium of FDI from the regional disparity and the economic macro-polices. The classical and neo-classical theories of economic growth have neglected the factor of space, this thesis tries to integrate the growth of regional economy with the spatial characteristics of FDI and conclude that the spatial agglomeration of FDI has promoted the economic growth.