Analysis On The Impact Of FDI On The Regional Income Gap Of China

The amount of foreign direct investment actually used from 1979 to 2010 came to $ 1.048386 trillion, with an average annual growth of 26.69 percent. This means average $ 32.762 billion each year. In 2010, China actually used more than $100billion foreign direct investment, reaching at $105.74 billion, occupied the first place 18 years in a row among developing countries,China has become one of the largest countries in absorbing foreign direct investment.More than 30% of gross output of industrial enterprises above designated size and 50% of total value of imports and exports were created by foreign-investment enterprises. as a complex of capital, technology and management, foreign direct investment has played an important role in social and economic life of China.With the rapid growth of FDI in amount, its regional distribution has showed great difference. The difference is not only embodied in quantity, but also in the way of investment, the country of origin, industry and FDI performance index, etc. Under this circumstance, foreign and domestic scholars had studied and verified the impact of FDI on national welfare and regional income gap of China from different perspectives. The paper probed the impact of FDI on China’s regional income gap with new economic growth theory, new economic geography theory, international investment theory,other FDI-related theories, etc. The paper also analyzed the application direction of FDI on regional income gap, and explored the path and function mechanism of impact of FDI on income gap, and tried to find out the gap of the way to use FDI among east, central and western regions to proposed reasonable and feasible countermeasures and suggestions.The paper consists of three parts.The first part described the effects of FDI on economy and welfare of host country from multiple perspectives including multinational corporation outsourcing theory, new economic geography, international direct investment location selection theory, and also analyzed the impact on income inequality of host country caused by location selection of foreign direct investment, outsourcing, self-reinforcing behavior. In the meanwhile, it researched the foreign and domestic papers, in order to clearly understand the research status and identify the shortcomings of existing research.on the basis of predecessors’experience, clarified and established the research framework of this paper, and created conditions and accumulated experience to carry out systematic analysis and research.The second part gave analysis on impact of FDI on regional income gap of China. First, the paper represented the development course and dynamic evolution of China’s regional income gap and differences in the geographical distribution of FDI, and found that they had consistent trend. On this basis,the paper processed China’s data from 1986 to 2008 and used Cointegration analysis and VAR ways to test Impact of FDI on regional income gap. And drew a conclusion that FDI was an important affecting factor for regional income gap of china. Following this, this paper analyzed the affecting mechanism from perspectives of capital formation, technology spillovers, wage spillovers and polarization effect, and probe the reason causing "strong west-east" phenomenon, then further studied difference among regions in attracting and utilizing FDI.The third part studied the factors that affected the expansion of income gap among regions caused by FDI. It also proposed countermeasures and suggestions in supporting industries, infrastructure construction, labor quality, government services, and level of marketization in order to promote balanced and qualified development of FDI in China’s eastern, central and western regions, and gradually narrow the regional income gap.In summary, this paper objectively and comprehensively measured FDI and regional income gap of China. And rigorously argued and tested the relationship between them. it also gave a systematical elaboration and study on the function mechanism of FDI, and made objective exploit and deep discussion on problems and reasons of different regions in attracting and utilizing FDI. The purpose of this paper is to attract more attention from scholars and promote the further research in this field, and facilitate a better understanding of the causes of regional income gap, to further improve the development strategy of foreign investment. and it is also expected to provide theory evidence for our government to make and implement differential FDI utilization policies among regions, also offers a valuable reference for regions to do a better job in absorbing FDI.