International Direct Investment (fdi) And The Relationship Of Economic Growth In Developing Countries

Since 1990s, foreign direct investment (FDI) has been developing to such a degree that it has been faster than international trade in commodities and has been on the quicker movement so as to have become a major force to drive global economic growth. FDI and its carriers, transnational corporations, are increasingly playing the important role in the world economy.In 1990 foreign direct investment inflows into the developing countries accounted for 12% and in 1995 went up 36%. The average FDI in the developing countries reached USD12.634 Billion, the annual growth rate being 69% from 1986 to 1995, 19.3% from 1996 to 2000, and 10% in 1990s. In 2000 FDI topped at USD240 billion historically, reached USD172.033 billion in 2003 and USD 268 billion in 2004. Of all the developing countries China, Brazil and India are the largest nations to attract FDI. FDI into developing countries are on the rise from time to time. There exist common problems for them: unperfected economic systems, unsounded market structures and risks arising from them during economic operating. Hence, it matters much for how to introduce FDI and for what kind of FDI to be introduced for the purpose of spinning economic growth. This dissertation is directed at dealing with the degree of linkage of FDI to growth and the mechanism of FDI functioning on development with the aim to finding out the effective countermeasures to steer economic practice in developing countries into healthy way.This paper mainly focuses on systematically describing FDI theories and the evolution of economic growth theories, probing into the relations between FDI and economic development, further discussing the laws of mutual action of FDI externalities, spillovers and economic growth, exploring the bottle neck issues on FDI effects in developing countries and proposing the strategies to achieve FDI externalities.Distinguished from the existing literatures, this paper combines qualitative, quantitive and comparison analysises into a whole one to deal with the relationship between FDI and economic growth. The most shining point is embodied by that China, India and Brazil at the same economic development level are used as the subjects to be researched for hunting for the correlation of FDI to GDP growth. And similar literatures in Chinese and English have never been seen till now. The main concluding remarks and contributions are reflected by the following points:Firstly, FDI is a safer channel of external finance. Compared with foreign official assists and liabilities to be in connection with private capitals, it is characterized by stability and seldom subject to incidents. As for developing countries, FDI has replaced the former parties to become the most important source of external funds.