Study On The Impact Of FDI On The Regional Income Disparity Of China

Coupled with the constant enlargement of attracting foreign direct investment, a great deal of FDI has flowed into China. In the fixed assets, now the source from inflow FDI has accounted for almost half of its share for the coastal provinces. While most of the provinces in the middle and western areas have only attracted a little amount of FDI. Do such a large amount of and FDI and its misdistribution have a certain connection with the obvious regional income gaps of our country? How is the mechanism of this connection?On the impact of the FDI on the economics in developing countries, there were two groups of researchers holding totally different points of view. The core bifurcation is whether the FDI will impact the income distribution of the host country. The modernization hypothesis argued that FDI will have little specific impact to the host country economy system by its special origin, but a common sense of investment only. And the unequal phenomenon of income distribution in a country is mostly caused by its specific economic structure and its particular developing period. However, dependency hypothesis considered that FDI are mainly poured into export oriented area has lead to those related people enjoying much higher income than the average level in the society, then caused huge gap in between to the income distribution. Until now, there is still not a final conclusion to the impact of the FDI on the regional income distribution of host country.In this case, to study the impact of the FDI on the regional income gap of China, we did the regression based on the panel data of the past seven years by empirical method. The result is that in general, FDI do strengthen the regional income gap of China. The result supports the modernization hypothesis as a whole.