A Study On The Influencing Factors Of FDI In Yunnan Province

With the gradual deepening of the global integration, the role of Foreign Direct Investment in the economic development of a country or region has become more and more significant. Since the reform and opening in China, there is a rapid and sustainable development in economic, also a gratifying achievement in the attracting foreign direct investment. In 2013, China had caught up with the United States to become the largest destination of the foreign direct investment in the world. However, due to various factors, such as policy, location and so on, the distribution of foreign direct investment in China is very uneven. Yunnan Province is located in the west of China, the economic has a great development, but it’s still relatively backward compared to the eastern region of China. The foreign direct investment in Yunnan has a same situation. With the implementation of the “One Belt One Road”, researching the influencing factors of foreign direct investment in Yunnan, proposing to improve the use of foreign advice, has an important significance for the Yunnan Province.First, through the collation and analysis of the literature, this paper expounds the theoretical and empirical analysis of the foreign direct investment, and proposes the theoretical foundation for the following empirical section.Then, this paper make a qualitative analysis of the characteristics and problems of utilizing of foreign direct investment in Yunnan and construct a gravity model to research the effect of the influence factors for the foreign direct investment in Yunnan, with the factors such as market size, distance, labor costs, bilateral trade quantity, the level of infrastructure, regional economic integration and so on. On the basis of the least square method, combining with the Panel Corrected Standard Errors method, the model is estimated, and the goodness of fit and the significance of the model are tested. The empirical study found that the market size, labor cost, bilateral trade quantity, infrastructure level and distance are main factors that influenced the utilization of the FDI in Yunnan, and the quality of labor isn’t significant for the FDI in Yunnan. The factors of market size, bilateral trade quantity, infrastructure level will enhance the scale of the utilization of the foreign direct investment, but the labor costs and distance will hinder the foreign direct investment inflows to Yunnan.Finally, according to the results of the qualitative and quantitative analysis, combining with the situation of Yunnan, this paper put forward the policy recommendations to improve the utilization level of the foreign direct investment in Yunnan Province, with five aspects such as labor advantage, the industrial structure, the sources of investment, investment environment and regional economic cooperation, to mining the potential of the attracting FDI, to achieve the rational and effective use of the foreign direct investment and economic sustainable development in Yunnan.