An Empirical Study On Foreign Direct Investment And Economic Growth Of Jiangsu Province

Foreign direct investment (FDI) is a wonderful flower in the garden of Jiangsu economic growth. Its inward FDI in 2003 exceed $15.8 billion, which is close to the 30% of China, and, instead of Guangdong, become the No. 1 province in the list of FDI in China. Do an empirical study on Jiangsu FDI under the theoretical frame of economic growth is the major task of this paper. It will give a theoretically explain and some suggestion on Jiangsu FDI. Author hope it can be useful in the decision of government.At the beginning of this paper, we expounded a theoretical hypothesis "FDI is an engine of Jiangsu economic growth" which is the main clue of whole paper. Because of its "packaged" resource characteristic, FDI can infiltrate systematically into the various possible inside mechanisms of economic growth. Then FDI become an inside incentive of growth from an outside factor. The following is the main mechanisms:(1) as an added capital put into the primitive accumulation of Jiangsu industrialization, and restructure other stock capital of Jiangsu, (2) its other factor including technology, management, idea, system, knowledge and competitive etc. can make deeply spillover effect in technological advance, industrial structural upgrading and system changes, (3) Multinational corporations (MNCs) can help to develop the trade of international trade of Jiangsu. In this analysis framework, we inspect carefully on all those mechanisms one by one.By using an econometric model, we verified our former hypothesis. We also do a Granger no-causality test between FDI and GDP. There is mutual causality between FDI and GDP in Jiangsu and Sunan. The single causalityfrom GDP to FDI exists in Suzhong and Subei, which means local GDP increase probably brings the increase of FDI, but FDI does not the Granger reason of their GDP growth.The conclusion of the paper is "FDI is the engine of Jiangsu economic growth in recent 25 years". Meanwhile we emphasizes FDI can promote Jiangsu's economic growth in a long run in the condition of four unsustainable factor can be eliminated, because its mechanisms are passageway to growth. The four core problem include MNCs monopoly technology, FDI was distributed unequilibriumly in industrial structural, processing trade is in the low end of the world industry value chain, the regional economic disparities because of FDI.Based on above analysis, we suggest using the "conception of scientific development" as a guiding ideology to promote the level of FDI in Jiangsu. (1) we should set up a scientific conception of using FDI, (2) we should restructure the strategy of using FDI, (3) we should improve the policy of using FDI. Some idea is aim for solving the four core problem, such as strengthen the competitiveness of market so as to guide the technology spillover of MNCs and raise autonomous technological innovation ability of home company. Enlarge the openness of market to use more FDI in service industry. Extend industrial chain and develop industry cluster to help transition and upgrading of processing trade. Overall regional FDI distribution, works hard to cultivate some economic growth area where have dense FDI, well combination of internal and external capital and strong power to bring prosperity for whole Jiangsu province.