The Empirical Study About FDI And The Economic Growrth In Shandong

The relation between FDI (Foreign Direct Investment) and Economic growth have been continuously paid deep attention by the economic academia. Positive research has already indicated that FDI flows into developing countries is benefit to economic growth of the host countries. Since reforms and opening-up to the outside world, China has been increasingly attracted and taken advantage of the FDI, whose quality has been improving. FDI effectively bridges the gap of China's investment and deposit, and enhances efficiency of the capital. It has become one of the most important factors which strength economic growth in China.As a coastal province, Shandong Province has always stands in the front row of the whole nation, in terms of the amount of FDI. However, there is few positive research in what role FDI plays in economic growth in Shandong Province. Therefore, analysis on the effect of FDI on Shandong's economic growth, as well as the factors which influence FDI, is necessary and meaningful to discover crux of the matter that need to be solved and to put forward effective policy proposals.This paper reviews the related literatures on FDI, and makes a summary to the related positive analysis of FDI. On the foundation of the existing literature, this paper combines both theoretical analysis and empirical studies, and studies the economic effect of FDI in Shandong Province as well as the key aspects which influence the economic effect of FDI. Following the theoretical analysis, this paper establishes several econometrics models, utilizes econometric analysis software Eviews3.1, and uses Co-integration analysis method and Granger Causality Test to test the time series for each group of economical variables, from GDP, foreign trade and labor force employment three aspects comprehensively examined the relation for FDI and Economic Growth of Shandong Province. The examination result indicates:(1) There is no long-term stable balanced relations between FDI and Economic Growth of Shandong, and but only the bidirectional short-term Granger causal relation. In the bidirectional Granger causal relation, the influence for Economic Growth of Shandong to FDI is stronger, but the influence for FDI to Economic Growth of Shandong is weaker relatively. It has following several reasons: Firstly, Industrial distribution of FDI is imbalanced, it concentrates in Labor-intensive Manufacturing Industry of secondary industry excessively, but the investment of technology-intensive industries and knowledge-intensive industries is insufficient seriously; Secondly, the regional distribution difference of FDI in Shandong is remarkable; Finally, advanced technology talents and senior administrative talents in Shandong Province are quite deficient.(2) In entire sample sector (1984-2005), there is no long-term stable balanced relations between FDI and the import and export of Shandong; The increase of the import and export are the Granger reason for FDI growth (has lag nature), but FDI is not Granger reason of the import growth and the export growth. In the sector of 1994-2005, it has unidirectional Granger causal relation between FDI and the import and export, namely FDI is the Granger reason for the import and export growth. This indicated that in recent years the promoter action of FDI to the import and export has enlarged.(3) The influence of FDI to labor force employment of Shandong Province is remarkable. The result of co-integration analysis indicates that, it exists co-integration relations between FDI and Shandong Province's labor force employment quantity, namely long-term stable balanced relations. FDI is the Granger reason for the labor force employment of Shandong Province. FDI has the remarkable promoter action to the labor force employment of Shandong Province.In view of the fact that it has obvious difference in using FDI in different regions and cities in Shandong Province, this paper inspects the achievements and the potential for different regions and cities of Shandong Province from the angle of regional differences. It compares Shandong with Guangdong and Jiangsu Province in many aspects of using FDI, and has discovered the disparity among Shandong, Guangdong and Jiangsu Province,and explained the concrete reason of these disparities.Finally, on the foundation of positive research, this paper proposes some policy suggestions on how Shandong Province should bring in and use FDI reasonably. The policy suggestions mainly include: Adjust the direction and the policy of using FDI; Give prominence to region guidance, strengthen location superiority; Enlarge the effect of technical overflow of FDI; Enhance the market competition degree of Shandong, promote the foreign merchant to carry on technology transfer and technical overflow; Give prominence to industrial distribution and origin place fully, guide FDI to shift from labor-intensive industry to technology-intensive industry.