A Study On The Economic Effect Of Foreign Direct Investment In China

With China's accession to WTO and the accelerating step of developing the country's vast western region and revitalizing old industrial bases in northeast region, foreign direct investment in China is ushering to a constantly climbing momentum. Under this historical background, China is more closely linked to the world economy and has been one of the hot spot of absorbing foreign investment. In comparing with the total amount of the world's FDI absorption, China has been the highest in four consecutive years. Theoretically speaking, there's motive motion and attractive factors in FDI. From the change of investment trend, it is not difficult for us to see that China is becoming the focus of foreign investment. FDI presented different investment motivation, experienced different stages of development and showed different periodic features. In this new situation, FDI arises some new dynamic changes. We have reason to believe that FDI is the transactional reunification and optimal allocation of resources, the rebuilding of the international production function and the establishment of target function, which will positively influence the economic effect of host country. We tried to combine normative analysis with positive analysis on the point of"FDI Performance Analysis", which is based on thoroughly understanding of FDI trend and our presumptive model. Extending study on this problem is an important part of our whole cognition of FDI, and will have certain theoretical meaning in understanding the reasonable operation of our national economy. On one hand, the article made a normative analysis on the effect of capital formation, industrial restructuring and employment of FDI. The result showed that FDI exists the effect of substitution and complementarities on capital formation and the effect of replacement and stimulation on employment, also promotes our industrial restructuring upgrading. On the other hand, we used SPSS to make regression analysis and correlation analysis to deal with the data of FDI's effect on international payments balance and economic growth. The result of study showed that there's a positive correlation between foreign trade, import, export and FDI whose promotion effect to export is more than import. It pushed the growth of our export mainly through foreign invest enterprises and made an outstanding contribution to improve the mix of exports, especially to industrial products than to primary ones. In the effect of economic growth, FDI is highly linear associated with GDP. Through the classical theory of economics, we analyzed respectively and closely the various demands caused by FDI's effect on economy with the result that FDI is remarkable to promote effective demands which directly influence the demands of investment and foreign trade and carry up the consume demands indirectly, which raised the standard of national income. That is to say, it increases the economic growth on the whole. In addition, we also analyzed the negative effect of FDI and put forward political suggestion for government to absorb foreign capital on thebasis of our realities.Name: Ai Yun (International Trade) Supervised by Feng Wenwei Shen Lei...