A Study On The Effect Of FDI On Economic Growth In Hubei Province

Data of GDP and FDI in Hubei Province from the period of1990to2013was used toinspect the economic development and FDI utilization of Hubei. The results show that theratio of Hubei’s primary industry out of GDP is declining. The second industry dominateseconomic development in Hubei. The percentage out of GDP maintains at50%. The ratio ofHubei’s tertiary industry out of GDP rises to about40%. Among the distribution ofHubei’s FDI, the proportion of primary industry amounts to about1%to2%of Hubei’stotal FDI. The proportion of secondary industry reachs about65%to75%. The tertiaryindustry absorbed about30%of FDI. From the perspective of industry segments,approximately60%of FDI flows into manufacturing industry and about25%into realestate industry. FDI into tertiary industry in Hubei gradually increases.This thesis inspects the influence of FDI on economic growth and their equilibriumrelationship, using econometric analysis methods on data of GDP and FDI in Hubei. Theresults indicate that FDI can promote economic growth in Hubei in the short run. But inthe long term, though there is mathematical equilibrium relationship between GDP andFDI, but this equilibrium relationship does not mean any Granger causality. That is, in thelong term, FDI cannot promote economic growth in Hubei.The short-term elasticity of LnGDP against LnFDI was calculated to be0.046andlong-term elasticity to be0.27through error correction model. FDI dominates thefluctuations of GDP according to the mathematical relationship between them, andrandom deviations are instantly adjusted by ECM. To maintain the long-term equilibriumrelationship between LnGDP and LnFDI, at t moment ecm will correct the disequilibriumof （t-1） moment at a speed of0.331508, pulling it back to the long-term equilibriumstate. Suggestions on rational use of FDI to promote economic growth in Hubei were putforward in this thesis.