The Analysis On Growing Effect In China's Drawing FDI

With the development of China's open policy, the amount of foreign direct investment in China is increasing day by day. In 2004, the total amount has reached more than 560 billion dollars. At present, under the background of enough money and lack of productivity, does China still need resolving FDI? Or, How can China make good use of the big amount of FDI, without more relying or the short-term economic increase and the unbalance of industry structure?From 1960s', there was many theory on FDI. Most of these theories are pay much attention to the mother country's reason, region and structure of aboard investment. Seldom, their study of the combination of the economic increase and the amount of FDI by other developing country is useless for China, especially on the study of brings in foreign capital and effect of economy growth.So, this paper chooses China—the biggest host country as the study object, to study what affect the FDI draw by China has happened in the past 25 years which is regarded as the best way to test the result of our work. The result is that: FDI is the key factor of China's development; every 1% increase in GDP is caused by every 0.15% increase in FDI. The FDI affect China's economy through the direct effect and indirect effect. They have sole effect and internal effect at the same time while the two effects have different power and point of descent. In the direct effect, the international trade effect is obvious, which build the first grade of FDI's economic growth. While in the indirect effect, technology advancement and industry structure promotion build the second grade of FDI's economic growth. And the capital accumulation effect along with some other outside effect, such as system innovation effect and effects of employment, which build the third grade of FDI's economic growth.On the background of fasting development of trade surplus and foreign exchange reserve, we must care more about the quantity of FDI, not the quality of FDI; reduce the speed of the export trade, guarantee the technology advancement, the promotion of Industry, the system vicissitude in order to the change the way of trade growth.