Influence Of Foreign Direct Investment In China

Since the reform in 1978, China Economic has growing rapidly. At the beginning of marketing process, a great deal of Foreign Direct Investment (FDI) flowed into China and reinforces the fund in development. It played a key role in productivity improvement and economic growth. But accompany with aggregation of domestic capital and enhancement of Research & Development (R&D), the disadvantage of FDI has been aware. Some Scholar consider that FDI will"crowd out"domestic investment, as a result the bank of citizens will be hardly turned into investment, so it is a good idea to restrict the level of FDI. Other Scholar argue that FDI bring in not only capital but also technology and is still benefit China Economic. In my opinion, the first point of view only emphasizes the disadvantages, and the later emphasize the advantages. Each of them cannot tell the all-sided impacts of FDI. The influence of FDI is comprehensive. Only do we give available suggestion, when we consider both aspect of it.Accounting for the complexity of problem, this Paper takes Jiangsu, an east coast developed province in China as an example, uses econometric method to discusses the influence of foreign direct investment (FDI) in China. Through empirical study base on the time series from 1992-2005 of Jiangsu Province, We find that: at first, FDI still play an important role in Jiangsu GDP growth; Second, FDI will"crowd out"domestic investment temporarily, but do not have long negative influence. Third, there is no evidence supporting that FDI benefit domestic firms'technological capability via technology spillover.In conclusion, I suggest FDI will not lead to benefit domestic firms'technological capability directly, but will improve domestic investment structure, encourage domestic enterprises accelerate R&D. The output of Foreign Enterprises account large proportion of Jiangsu province GDP, so Jiangsu economic will growth if the level of FDI ascent. The province government should encourage FDI flow in while enforce direction and programming of domestic enterprises, assistant them to adjust open economic environment, enhance capability in competion.