Research On The Impact Of FDI On China’s Urbanization

As the world’s largest developing countries, urbanization has become an important factor of China’s economic development at this stage, but also become the key to solve many economic problems. With the urbanization in China to enter the period of rapid development, cross-border and cross-regional capital mobility greatly enhance FDI introduction, and experienced a rapid period of development after China’s accession to the WTO, it brings a lot of foreign capital and developed high-tech at the same time, must be China’s urban development and urbanization cannot be ignored. When foreign-invested enterprises select to invest in the host country or region, the level of financial development is an important factor to consider. Therefore, in the current economic situation, to explore the impact of FDI on urbanization based on the financial development perspective, In order to clear how China’s urbanization be affected by FDI in different levels of financial development, has important theoretical and practical significance on how to improve financial environment at different levels of financial development, use foreign direct investment and promote the urbanization process.Therefore, based on the big push theory proposed by Rosenstein. Rodan, this paper put forward that foreign direct investment affect China’s urbanization process through the employment structure, industrial structure, land structure and other factors. And it use the method proposed by Hansen (1999) with the1987-2010provincial panel data, to build the threshold panel regression model, in which the level of financial development as the threshold variable, to know the impact on urbanization by FDI of financial development perspective. We found that: FDI impact the urbanization in China in a significant level of financial development with the three threshold effect; in lower level of financial development FDI plays a significant role in promoting China’s urbanization, and with the improvement of the level of financial development, the promotion of FDI on urbanization has also been enhanced; But with the level of financial development over the second threshold value, the effect of FDI in promoting the process of urbanization is no longer significant, and even with the lever of the performance of financial development becomes higher it will react. This shows that, to some extent, the impact of FDI on the process of urbanization depends on the degree of development of financial markets in the region.In addition, from the estimated results of the control variables, education level, fixed-asset investment and industrial restructuring has a stable role in promoting the urbanization process.Accordingly recommended that:(1)Accelerate the improvement of the level of financial development in the country, especially in central and western regions, and create a favorable financing environment for FDI to enter. Establish and improve the financial market mechanism, deepen financial reform, optimize its financial structure, and a variety of investment should be brought into urban construction;(2) Low level of financial development in the region, actively and vigorously the introduction of FDI in areas with high level of financial development improving the urban environment, strengthen urban infrastructure;(3) Increase the opening up of central and western regions, to guide China’s FDI equilibrium distribution;(4) Education for all, improve our level of human capital.