Comparative Study On The Effect Of FDI On Regional Economy In China And The Locational Decisions Of FDI

FDI in China was encouraged since the end of 1978. Foreign capital has contributed to China's economic growth and development. But the regional distribution of FDI in China unbalances, more than 80% FDI has concentrated in eastern region, at that time, economic growth in eastern region is faster than in western region, the economic disparity has became worse than before. To discuss how FDI influence economic growth and find out the factor of attracting FDI have important academic and practical meaning, it can reduce the economic gap between eastern and western regions, and encourage western region to utilize FDI.This paper is composed of six parts. Part 1 introduces the regional disparity of economy and FDI simply. Part 2 presents thesis review and literature summarization on the effects of FDI on the economic growth and it's spillover effect. Part 3 Estimates on the effects of FDI on the economic growth and it's spillover effect the in the eastern and western regions using Panel data and neo-classic growth model. The results of regressions indicate the effect of FDI on GDP is significantly different between the eastern region and the western region. It is stronger in the eastern region than in the western region. This demonstrates FDI aggravates the disparity of regional economy in China. And it discusses the spillover effect of FDI in industrial sector in the eastern and western regions using improved Feder model. Regression results show FDI increases the output of enterprise invested by domestic capital as a whole, but the effect in western region is least because the level of economic development doesn't stride threshold that FDI can operate. Part 4 discusses important factors influencing FDI location basing partial adjustment model. Agglomeration economy is the most important element. At one time, increasing the degree of open and reinforcing the power of favorable policies are main factor to attractive FDI in western region. Part 5 investigates the character and effect of FDI in Chongqing city. Part 6 offers political proposals according to the frontal conclusions, especially to the western regions.