Study On The Impacts Of FDI On Economic Growth Pattern In Guangdong Province

The influence of Foreign Direct Investment (FDI) to host region’s economy hasbecome a topical issue for a long time. While, the vast number of publications focusedsolely on one certain aspect of the impacts, for instance, FDI productivity spillovereffect, FDI technology spillover effect, the impact of FDI on host region’s economicgrowth or its exports, etc. There are, however, nearly few conclusions aboutinfluences of FDI to host region’s economic growth pattern, which is definitelysignificant for us to study the utilization of foreign investment in China, given thecurrent background that there are excessive capital supplies in China and the prices ofproduction factors are rising.Guangdong Province was the first region in China that made use of foreigninvestment, and it has absorbed numerous foreign investments at a comparatively highspeed since China’s reform and opening-up. Its amount of FDI in actual use hasalways accounted for more than80%of its amount of foreign funds in actual use forthe last two decades, and that ratio has even been higher than90%since the year of2008. And its amount of FDI in actual use rose from about0.031billion US dollars in1979to about23.549billion US dollars in2012, while the accumulated amount wasapproximately298.8billion US dollars by the end of2012. So FDI has become animportant driving force for this region’s economic growth. Despite the fact that yearsof growth of foreign funds do have stimulated the rapid economic growth in thisregion, there still exist lots of problems appeared during this process. Therefore, it’sabsolutely necessary for us to study the quality of foreign investment in this regionand whether FDI has led to the transformation of the region’s economic growthpattern, which is a significant issue for the study of the promotion of sustainableeconomic development in Guangdong Province and the utilization problem of foreignfunds in other regions as well. This paper firstly explores the general effect of FDI on the economicdevelopment of Guangdong Province by discussing the region’s current condition ofeconomic growth and its utilization of foreign funds with the combination of dataanalysis and chart analysis. It then measures the region’s Total Factor Productivity(TFP) based on the method of Solow Residual, and draws a conclusion about whetherthe region’s economic growth pattern is transforming from Factor-AccumulationPattern to TFP-Promotion Pattern by discussing whether the rate of contribution ofTFP to economic growth has been rising up over time. And eventually, it empiricallyanalyzes the impacts of FDI on the region’s economic growth pattern with the methodof econometric analysis and puts forward some relevant suggestions for how to makebetter use of foreign funds and promote the optimization of economic growth pattern.The major findings suggest that:(1) it can’t be true that all kinds of investmentwill bring negative impacts on the variation of TFP in Guangdong Province;(2) itmay do harm for the transformation of Guangdong Province’s economic growthpattern if the region’s capital input keeps rising at a high speed while its economicgrowth tends to slump;(3) it will promote the transformation fromFactor-Accumulation Pattern to TFP-Promotion Pattern if the ratio of FDI to totalamount of investment tends to rise;(4) direct investments coming from Hong Kong,Macao and Taiwan tend to have less positive impacts on the transformation andimprovement of Guangdong Province’s economic growth pattern compared to thosecoming from other regions;(5) the improvement of capability of independentinnovation is extremely significant for the optimization of Guangdong Province’seconomic growth pattern while the enlargement of trade openness may not bringobvious positive impacts on the transformation of economic growth pattern.