A Study On The Economic Growth Effects Of International Capital Flows In China

International Capital flow has increased year by year since the opening up of the Chinese economy to worldwide markets. The dissertation reveals how capital flow (Including FDI) has contributed to Chinese Economic growth.It examines the relationships between capital flow and economic growth using the examples of the U.S.A., Japan, Singapore, Korea, Hong Kong and the countries in Latin America. Then it studies the relationships between international capital flow(including FDI) and economic growth through abundance empirical literature.The dissertation applies CGE model to simulate the effects of capital flow on Chinese economy. Then it makes the following conclusions: Capital outflow has far more influence over its economy than capital inflow; Capital inflow leads to the increase of national output. And as the volume of capital inflow increases, so does the domestic supply and export. Consequently there will be upward pressure on prices; Capital inflow may cause the import volume to drop and the prices of imported product to go up. Real exchange rates devalue and the volume of export increase; Capital inflow may also lead to the increase of family spending, savings as well government earnings and savings.The empirical study reveals the size of FDI, investment areas by industries, regions and sources. It applies Granger-causality test to research on the relationship between China's FDI and the increase of Chinese economy and export. Empiric results indicate that there is a bidrectional relationship between FDI and economic growth while there is a unilateralist relationship between FDI and export; To utilize impulse response function and variance decomposition of FDI to reveal the effect of FDI on Chinese macro economy.Lastly the dissertation presents its views of China's strategies towards international capital flow: Improve investment environment to attract more capital inflows; Maintain appropriate ratio of capital inflow and utilize existent international capital; Improve the structure and the quality of capital inflow; Implement going-out tactic and form bidirectional capital flow; Monitor international capital flows to avoid risks.