Study On FDI And Economic Growth From The Perspective Of Financial Development

Financial development refers to a dynamic process, in which the functions of finance continue to improve, expand and thus promote the financial efficiency and economic growth. The level of the financial development of a country is very important to the introduction and growth of FDI and the learning and imitation of domestic sectors, it can achieve the goal of economic growth by promoting capital accumulation and technical progress of both FDI and domestic enterprises. Doing research about the relationship between FDI and economic growth from the perspective of financial development and thus making policy suggestions is very significant to realize economic growth by introducing FDI and improving domestic enterprises.Based on existing research, starting from China's national conditions, this article explore the nature of China's financial development and study the relationship between FDI and economic growth on the basis of deep understanding of nature of China's financial development. Firstly, this article points out that the finance of China is controlled by government to support the state-owned enterprises and makes applicability analysis of indicators of financial development through the analysis of the nature of China's financial development, according to the applicability analysis, the financial intermediary indicator would be idea indicator to reflect China's financial development. Then,establishing a theoretical model to make mathematical derivation of the role of financial markets to the FDI and economic growth, results show that the efficiency of financial markets affecting the economic growth by affecting the domestic sectors'absorption of spill-over effect of FDI; in the basis of the theoretical analysis, this article make qualitative analysis about the channel effect of financial markets between FDI and economic growth, results show that financial markets can affect economic growth thorough channels of capital formation, human capital, industrial linkage, technology innovation and investment efficiency. Then ,this article makes Empirical Analysis about the relationship of FDI and economic growth from the financial development perspective, results show that FDI can promote economic growth effectively, however, the whole level of financial development is not positive to economic growth. In the view of financial resources flow, financial markets'support to non-state-owned sector can absorb the spillover effects; however, the policy loans to state-owned sectors are negative. This article finds that Further analysis financial markets'support to non-state-owned sector can realize economic growth by promoting capital accumulation and technical progress, however, the whole level of financial development and policy loans to state-owned enterprises is negative. Finally, based on the analysis above, this article suggest China should keep realizing the market-oriented reform of financial system , accelerate the establishment of financial system for small and medium sized enterprises and insist on the reform of state-owned enterprises to absorb the positive effects of FDI better and realize long-term, stable and rapid economic growth.