The Effect Analysis Of Foreign Direct Investment On China's Economy

As a developing country, China has made great achievements in the field of FDI since the implementation of reform and opening-up policy. Through empirical analysis we not only make a good verification of relative theory but also provide useful advise.This paper aims at demonstrating the influence of FDI to china's economic increase , investment, employment, technology progress and foreign trade with the data ranging from 1980 to 2003. Based on the research we make two-steps research.After empirical analysis , we come to the following conclusion: (l)FDI will improve economic growth through investment, employment, technology progress and foreign trade. (2)Although FDI has a positive effect of investment and employment, it lowed the domestic investment. (3) FDI has a positive effect of technology progress through total factor productivity(TFP)and technology spillover. But the influence of TFP is more obvious than technology spillover, the influence of TFP is the key factor.(4) FDI is complementary with Chinese exports in long-term. In addition, FDI is complementary with Chinese exports in short-term, but in long-term the relationship is substitution. FDI has a positive effect of merchandise exports structure in the long - term and a negative effect in the short - term , but the net effect is positive. The results indicate the FDI has improved Chinese merchandise exports structure.(5)FDI has obvious difference in the effect of economic growth, investment, employment and foreign trade ranging from 1980-1992 to 1993-2003, but technology progress don't exist.Additionally, we are aware that this paper only gets the above conclusion through empirical study and still needs further explanation.