Economic Growth Effect Of Service Industry FDI

Since 1990 foreign direct investments(FDI) in service industry gradually replaced the manufacturing FDI. Increasing foreign direct investments appears in service sectors. The same situation is happening in Guangdong Province, a highly opened economic entity in China. Increasing foreign direct investments are attracted to the service industry and that’s the case for the real estate sector. To explore the effects of these changes makes sense and this paper mainly research the economic growth effects of the services foreign direct investments.First, related research materials are cited and opinions of the previous researchers are classified, which attribute to the theoretic analysis of mechanism about how the service industry FDI affects the economic growth. Second, the facts of Guangdong economic growth and the service FDI are analysed. Then this paper uses the panel data from 2004 to 2012 of Guangdong province to explore the economic growth effect of foreign direct investments(FDI) in service industry. On one hand, the services sectors are classified and the growth effects brought from the FDI of different sectors are discussed. On the other hand, we explore how the local service development could affect the growth effects of the services FDI.The results reveal that not all the service sectors’ FDI bring economic growth effects. The FDI of high tech service sectors can bring growth effect to the economic development, while FDI of other service sectors can’t. And the growth effect would be affected by the level of services. The FDI of service sector can bring growth effect only when the development of service industry passes specific level. When the government officials hope to use the FDI to push local economic development, they should not only develop reasonable and consolidated policies, but also take the level of service industry development and the difference of service sectors’ FDI into consideration.