A Positive Study On The Effect Of Industrial Agglomeration On FDI Location Choice

With the accelerated procedure of economic globalization, Foreign Direct Investment (FDI) in terms of flow and stock has been increasing simultaneously, which plays a important role in Chinese economy rapid growth. Since the implement of the reform and opening-up policy, FDI in China has increased steadily, while the regional distribution of FDI takes on an uneven spatial pattern. The disparities may prevent Chinese economy developing continuously, soundly, and harmoniously. Therefore, pursuing new strategies to stimulate more FDI to flow into West China, seems an urgent project for regional economy growth in phase.The paper summarizes the continuously changing primary factors affecting the FDI location choice .Based on the traditional FDI location choice theory, using data in China from 1999 to 2005, conclusions, from a panel data analysis, are drawn that agglomeration economy acts as a major factor affecting the FDI location choice, while agglomeration economy affects location choice weakly in West China comparing to that in the whole nation. On the basis of positive research, the paper point out some correlative suggest that in order to develop the agglomeration economy level in Western region, we should improve the investment environment and optimize FDI policies, especially quicken the city construction and improve business service in West China. So we can correct the FDI uneven spatial pattern and help Chinese regional economy grow harmoniously.