Financial Process Catalysis FDI And Industrial Agglomeration

In recent years, China’s finance has a rapid development. However, Financialdevelopment exist many considerable regional disparities in eastern, central andwestern areas in China. This paper analyzes the current situation, characteristic andregional disparities of China’s financial development, FDI and industrialagglomeration, and also research FDI and industrial agglomeration in30provinces orcities of China through building the models. Then find that in the restraining factors ofindustrial agglomeration caused by FDI between2000and2010, the level of economicdevelopment, economic structure, infrastructure, human capital and the development ofprivate economy has played a non-significant role. At present, financial development,as a vital factor, restricts the formation of industrial agglomeration and FDI’s spillovereffect directly, and physical capital investment is also a non-negligible factor. Theeastern area has a high level of financial development, so FDI can promote industrialagglomeration significantly, on the contrary, the central and western areas has a lowlevel of financial development and FDI cannot affect industrial agglomerationsignificantly. Then, by utilizing China’s provincial panel data during2000-2010combined with the level of provincial financial development, this paper examinesindustrial agglomeration effects in30provinces or cities of China caused by FDIthrough building the panel threshold regression model, which proves the fact that thereexist many considerable provincial and regional disparities in the influence of FDI onChina’s industrial agglomeration. Actually, the disparities of industrial agglomerationcaused by FDI lie in a number of restraining factors. Though measuring andcalculating，this paper find that local financial development is the most importantrestraining factor, and FDI can promote industrial agglomeration effectively for thereason of financial development’s catalysis. Meanwhile, this paper proves that China’sdevelopment exist threshold effect，and have a regression test on the financial thresholdin the process of industrial agglomeration effects caused by FDI through building thethreshold model. Finally, this paper have a grounded academic analysis on the channelfunction of financial development in FDI and industrial agglomeration combined withthe results of the empirical study，and find that financial development will affect FDIand industrial agglomeration though the channels of capital formation、human capital,technological innovation, Industry Association, investment level and marketenvironment. Because of the six channels, financial development plays a positive effect and vital catalysis on FDI and industrial agglomeration continuously.