The Research Of Mutual Relationship Between FDI And Industrial Agglomeration In Shandong Province

After the reform and opening policies, the scale and amount of FDI in our country is increasing, the impact it put on our economy is more and more obvious. Currently, FDI has become the important content and basic form in the building of our economy. The research on the relationships between FDI and industrial agglomeration has important meaning of effective usage of foreign investment and development of local economy, on the position of China's entering into WTO and fastening of the step in the international-economic-integration.This thesis is divided into five parts. In the first part, the economic globalization and foreign direct investment bring on the geographic concentration of multinational corporations. The writer brings forward the main topic of the thesis on the basis of it. In the second part, the theoretical analysis and reviews of literature are put forward on the aim of the relationship between the FDI and industrial agglomeration; also the analysis is carried out mostly from two aspects, which include the impact of Agglomeration Effect towards the choice of the location of FDI and the impact of FDI towards industrial agglomeration. In the third part, the writer discusses the mutual relation between FDI and industrial Agglomeration and brings forward the circular and cumulative causation Mechanism. The explanations are made on the relations between FDI and the industrial agglomeration. In the forth part, the co-integration test is taken on the relations between FDI and the industrial agglomeration, which prove the existence of the circular and cumulative causation Mechanism, taking the example of chemical industry of Shandong province. In the fifth part, the countermeasures and suggestions are taken on how to effectively utilize foreign direct investment in Shandong Province, on the basis of theoretical analysis and empirical test.Main conclusions: Firstly, on the theoretical and empirical analysis, the relation between Foreign Direct Investment and industrial agglomeration itself is confirmed the existence of circular and cumulative causation Mechanism. Secondly, the empirical analysis shows that in the long run, a positive correlation existed between FDI and industrial agglomeration in the chemical materials and chemical manufacturing industries of Shandong Province. Every one percentage point increase in foreign direct investment, the index of regional specialization of chemical materials and chemical manufacturing industry will increase about 0.31 percentages from 1996 to 2005. Instead, the increase of the index of industrial agglomeration could also urge more flows of FDI into the industry.Major policy suggestions: first, strengthen the policy coordination and build up an integrated economic region. Second, create a harmonious investment environment, promoting the sustainable development of FDI and industrial agglomeration. Third, develop industrial agglomeration of MNCs relying on the existing or existed industrial agglomeration. Fourth, continuously perfect the system of division and coordination in the region of industrial agglomeration. Fifth, run good of industrial parks, forming the industrial agglomeration and the advantage of scale.