Relationship Between Service Sector Inward FDI And Economic Growth

Traditionally, foreign direct investment (FDI) was mainly directed to themanufacturing sector. Since the1990s, a new trend in the internationalization of capital hasemerged that services sector has been one of the main destinations. FDI in service sectorhas attracted a growing attention from scholars at home and abroad，especially therelationship between service sector inward FDI and economic growth. However, theconclusions are different due to research perspectives and methods.This paper puts its hypotheses based on the original viewpoints and then tests these.The author use econometric methods, included ADF test, Johansen test, Granger test, OLSregression analysis and reach the conclusions: service sector inward FDI cause theeconomic growth, while the economic growth dose not cause service sector inward FDI;Compared to manufacturing sector inward FDI, the economic output elasticity of servicesector inward FDI is greater; Among the five mechanism, technical effect is the mostimportant, followed by capital effect, employment effect and the industrial structure effectand system effect are not notable.With the degree of openness deeper and deeper in Shandong Province, the scale andquality of service sector inward FDI, which has the fastest increase in the actual utilizationof FDI, has been improved more, which will promote economic growth significantly. Thepaper selects Shandong as case and presents the development of service sector and FDI ofit in Shandong. Then the anthor carry on an empirical analysis with the data of Shandongprovince from1984to2010and get the conclusions in accordance with the status inShandong. Finally, the author gives some suggestions to absorb and make use of servicesector inward FDI to stimulate economic growth.