Evaluation Of The Comprehensive Effect Of FDI: The Development Of The Theory Of "Immiserizing Growth" And Empirical Analysis

With the process of reform and opening-up and globalization, China has been the direction to attract the most FDI than any others in the world since 2002. FDI had brought a powerful impetus to our national economy, stimulating our economic growth with a rapid speed. However, the negative effects of FDI have been ignored for the appearance of economic growth, and even a fetish of FDI has been taken to a certain extent. In the process of attract FDI, we have paid much attention to quality, but not quantity, and have neglected the negative impact of our ecological environment, domestic capital and employment Crowding-out effect. We lack integrated evaluation of our unitary welfare. And provincial and municipal government officials for highlighting their achievements were competing in attracting foreign investment, which cause some officials only focus on the amount of capital, not the quality of the introduction of foreign investment. Although it could bring production and revenue increased, welfare losses will offset the effect brought by FDI, then our national economy was trapped in "Immiserizing growth", which not conducive to a sustained and healthy economic development."Immiserizing growth" theory advocated the idea of contrasting the positive and negative effects of international trade practices that given the important revelation in this article, and it is also a source of inspiration for this study. Based on "Immiserizing growth" and FDI effect theories, this paper integrated the two and expand the traditional theory, associated with welfare economics theory, to build a comprehensive evaluation indicator system of how FDI affecting our welfare. Then, using relevant data from the production and consumption two ways to carry out empirical analysis, the result shows that FDI may have "squeezed out" effect to local capital, and employment, but"squeeze"effect is more than "extrusion" effect, which has a positive impact on employment and output. FDI have a positive impact on technology progress, consumption and trade, while it will increase the inequality of income distribution in China and undermine China's ecological environment. This article analyses the negative effect of FDI from the capital, employment, trade and eco-environment four aspects. The analysis shows that the "extrusion" effect to domestic capital and employment increased, while FDI also contributed to deteriorate the "terms of trade", "immiserizing growth" trends caused by FDI are becoming evident. This study shows that the diversity and uncertainty of FDI effects are the root reasons which caused the host country "immiserizing growth". To guard against "immiserizing growth" problem, we must comprehensive survey the various effects of FDI conducted, as the basis for the introduction of FDI. In consideration of "immiserizing growth" trend by FDI in China, we must adjust our foreign policies accordingly, changing the traditional "investment" policies to the "election funding" policies, promoting a better coordination relationship of FDI introduction and our national economic development.