| Since reform and open, China came to introduce FDI into effect. With the deepening of reform and increasing globalization all over the world, both the capital amount and the projects of FDI had break through. The traditional view is that introduce of FDI could solve the problems of capital shortage and technology bottleneck and so on which host country had faced. FDI could promote technological upgrading and improve industrial structure. By the impact of the global financial crisis began in2008, the capital amount and projects of FDI in China had decreased in2009heavily, which had aroused the attention of numbers of economists and policy makers. The related researches believe that the decreasing introduce of FDI would impact capital supply, cause capital shortage, and will affect the sustainable economic growth. In reality, the contradiction that main stream theory believes there exists "two-gap" in Chinese economy has been disappeared. On the contrary, China reached to the "double surplus, however, China still encourages to introduce FDI actively, and the negative effect that FDI brings into central and local economic growth is sharper than before. More noteworthy is that the west part of China is the disadvantaged area, but like others, attracts FDI actively. The result is that the cost of FDI is bigger than profit; economic structure becomes unbalance, and cause cutthroat competition among local enterprises. Understanding, analysis and explanation of the above contradiction are the start point of this article.Because of the rigescent foreign exchange management regime in China, the foreign currency that we introduce must exchange into RMB, so that could be fully utilized. Therefore, there is one precondition before FDI capital use in market that is issuing matching currency. And at that condition, foreign exchange reserves had increased. Sovereign currency theory which Minsky and Wray posed believes that the sovereign nation which has floating exchange rate could supply sufficient currency for expenditure and could achieve effective backflow of capital. So that, in China, the increasing foreign reserves becomes the effective method to stabilize exchange rate, and this is not an inevitable choice to obtain effective fund supply. On the contrary, the passive and unordered issuance of currency would impede the utilization and implementation of national credit policy. The excess growth of China’s foreign exchange reserves could leads sharp risk of foreign currency assets.Different from central government, local government introduce FDI actively, this is actually the "unspoken rule" of "forcing" financial support from central government. West part of China is the weak area, has larger capital gap. However, the method of getting financial support from attracting FDI would cause excess growth of foreign exchange reserves and lead passive and unordered excess issuance of currency. Meanwhile, the FDI which west part introduces is not the endogenous demand of the economic entity. That is the forcing impel of "quantity type" growth by local government. So that it is difficult to bring positive spillover effect. And even high pollution and low added value of FDI, which not only fail to promote the west part of China’s economic growth, but also cause negative effect, such as moral risk, environment pollution, more difficult industry upgrading and so on. Sustainable development turns to be all jaw, and made west part of China pay more.The analysis of this article starts from development history of FDI, studying developmental characteristic of FDI, and based on sovereign currency theory explaining capital operation of FDI and the effect of attracting FDI, then put suggests. The central government should increase transfer payments to the west, reduce the risk of blind introduction of foreign capital, and accelerate foreign exchange regime with stability. To reduce negative effects of economy from introduce FDI blindly. |
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