The Relationship Between FDI And Domestic Savings, Domestic Investment

Since the policy of reformation and opening, attracting foreign investment was established as an important economic policies in our country, the introducing pace of foreign investment is more and more quicker, particularly after 1992, China's use of foreign direct investment (FDI) was swift growth and in 2002 to replace the U.S. as the first one in attracting foreign direct investment in the word. The introduction and use of FDI in China's economic growth has played a huge role, but the introduction of FDI has the substitution effect of domestic savings, and the crowding out effect domestic investment. On the other hand, China's domestic savings always set up a new high figure these years. End may 2010, the balance of household savings in China reached 28.51 trillion, per capita saving more than 20,000, national savings rate also more than 50%; while the domestic investment rate and domestic savings rate of synchronization increased, Since 2001 after China's accession to WTO, the domestic investment rate is continual rising, this figure reached 47.52% in 2009, the average remained at 36% average. High savings provides a strong capital backing to China's economic development. China had a tendency to low savings rate and high consumption rate in a long time, at the same time, the difference between domestic savings and investment has been stable at a average level 2.5% of GDP, which reflects from one side that the high rate of domestic savings, savings can not be effectively translated into investment. As the market continues to expand and open, the deepening and development of the economy, continuing to maintain a low consumption rate and high capital formation rate, at least, is not conducive to the continued growth of the Chinese economy. This indicates that the large inflows of FDI and the existence of excess domestic savings, domestic savings can not be effectively translated into domestic investment and savings-investment real is too low. Therefore, the research for FDI and domestic savings, FDI and domestic investment relationship becomes very necessary.August 2007, the U.S. sub-prime mortgage crisis was quickly spread to the world from the United States, other major financial markets, all the world was access a recession, not only endangers the virtual economy, and also spread to the real economy. The U.S. sub-prime crisis was the most serious financial crisis since the 30 years of the 20th century "Great Depression, has a great shock and damage to the international financial order. The world's major economies, central banks, government agencies and financial institutions to an unprecedented response to the crisis, central banks injected to the market to increase liquidity, to maintain the normal operation of the market order, There is also a series of economic stimulus plan, in order to help the economy recover as soon as possible. With the apparent effects of these policies, global markets slowly rebound. China's economy in the end of 2009 has gradually improved, forming a "Ⅴ"-type inversion, exports slowly getting better, the stock market gets a small bull market, the real-estate also has a slowly rising. So that by 2010, Due to the increasing inflationary pressures in the market and the RMB appreciation pressure, the central bank raised the deposit reserve 3 times, release a number of one-year and three-year central bank bills, but also introduced some real-estate regulation policies, But along with the European sovereign debt crisis arose the second increasing the possibility of sub-bottom of the world economy, the world economy has entered a new economic turning point. As the change of the economic environment at home and abroad after the U.S. sub-prime mortgage crisis, the research on the relationship of the before and after FDI, domestic savings, domestic investment has the actual significance, and in accordance with empirical results and the real economic situation, providing some constructive comments to our government's macro economic policy. At the same time, in the context of post-crisis era, countries ushered in a new round of challenges and opportunities of development, and where is the China's economic development going? Therefore, in the dual background of economic globalization and financial integration, to study how the macroeconomic conditions in the open to attract foreign investment and foreign investment to achieve the phase equilibrium and thus to achieve a country's economy sustained, rapid and healthy growth, will has considerable practical significance and value.In this paper, by way of the econometric model building, empirical research and normative research, we used a combination of methods to before and after the U.S. sub-prime mortgage crisis, FDI, domestic savings and domestic investment data as samples and make the relationship between explanations, also make a comparative analysis before and after empirical results. The first chapter is an introduction, statement of research background of this article and its significance, focusing on the relationship between FDI and domestic savings and the relationship between FDI and domestic investment, reviewing the domestic and foreign literature and research findings related, this study also described ideas, research methods and lack of innovation and, given the structural diagram of the main sections of the article. Chapter II introduces how the FDI, domestic savings and domestic investment concepts to be defined, but from all aspects of FDI, domestic savings and domestic investment in the status quo, development trend and changes were summarized and analyzed. Chapters III and IV under the November 2001 after joining WTO, the U.S. sub-prime mortgage crisis (August 2007) as a watershed in the middle, by using of FDI, domestic savings and domestic investment statistics, the establishment of an empirical econometric model test before and after the financial crisis and the empirical results of comparative analysis of the economic situation in light of the actual interpretation of test results and analysis. Chapter Five at the previous paper, theoretical analysis and empirical research, based on the summary of the full text of the basic conclusions, and thus triggered some thinking problems, such as how to use of FDI more effectively, how to improve the conversion efficiency of savings investment, and the transformation of economic growth, and further more, how to make better use of FDI to promote economic development in China and how to improve the savings investment the equilibrium level of investment in the corresponding policy recommendations.