The Role Of Foreign Direct Investment In China 's Economic Development

As we all know, since the Reform and Opening-up to now, China’s economic growthmainlydepends on the inflow of foreign direct investment. As the country of huge inflow of FDI in the world,China accounted for one-third of the total FDI flowing to all the developing countries. On the other hand, China is becoming a major source of the capital supply for the world. In recent decades, with the rapid development of China’s domestic economy and international trade, the country has accumulated a large amount of capital. Therefore, China has increased the inflow and outflow of the foreign direct investmentin bothquantity and quality. Although the scale ofdirect investment which comes from foreign countries to China remains larger than the one outflowing from China to the other countries, but its growth rate cannot be overlooked. Especially in recent years, the scale of growth in outflows of foreign direct investment in China has increased evidently, which means that China’s economic model is gradually shifting from export-oriented to foreign investment-oriented. Significantly, under the “open economy" construction, the importance of the foreign direct investment outflowing from Chinakeeps increasing. Although foreign direct investment in China is still at the early stage of development, with small scale, and invisible effect on the economy. But the study of the foreign direct investment’seffect in China on the domestic economy is still necessary.Which period is the dependence of China’s foreign direct investment on?What is its circumstance? And how the foreign direct investment affect the economic? All the problems are controversial issues. So, this article will try to discuss and solve these problems. This paper attempts to refer to the relevant theory or literatureto tease out the transmission mechanism between the foreign direct investment and the domestic economy in three aspects in China.Andthe we will test the conclusions by empirical measurement methods. Meanwhile, through the comparison between China and the US, we can found the characteristics and problems of China’s foreign direct investment in its development. At the same time, this paper will try to use Dunning investment cycle theory to explain the history trend and the stage which China’s foreign direct investment is on in the development. Moreover, taking the limitations of the empirical data into account, we will select some appropriate enterprises who participated in investing to the foreign countries as cases to supportingthe previousview. Through this series of studies, we will found which found that the effect of China’s foreign direct investment on the country’s economic development, and some guidelines for the development of China’s foreign direct investment strategy in the future.