The Direct Investment Of Hong Kong To The Mainland Of China And Its Economic Effect

Hong Kong is the bridge through which capital flows into mainland, while mainland is the motherland where Hong Kong relies on. Since the reform and opening-up, FDI from Hong Kong has constituted the major part of FDI to mainland. First, the FDI from Hong Kong filled the capital shortage, in addition, it indirectly affect the economic growth of mainland. Hong Kong and mainland have the same origin. Hence, the research into the FDI from Hong Kong has important both theoretical implications and realistic implications.This paper researched the features as well as problems of the FDI from Hong Kong, by using quantitative analysis and using the data of FDI from Hong Kong from 1987 to 2006 and the data of mainland's economy during that period. At the same time, this paper explored the main factor that attracts FDI from Hong Kong by using qualitative analysis. The conclusions are: the most important factor that attracts FDI from Hong Kong is the openness of mainland's market, and the second important factor is the cheap labor cost in mainland. However, the economic growth of mainland is not as attractive to FDI from Hong Kong as expected. This paper focused on the importance of FDI from Hong Kong to the economic growth of mainland, also, we analyzed, from the perspective of investment, the mechanism how FDI from Hong Kong influences the economic growth of mainland.This paper mainly focused on the answer to the following three questions: (1) whether FDI from Hong Kong has a positive impact on economy of mainland? (2) If FDI from Hong Kong has positive impact on economy of mainland, then how? (3) What are the characteristics of economic effect of Hong Kong's FDI? We reached some conclusions by using detailed data and by using the software Eviews. Our conclusions are: the long-run effect of FDI from Hong Kong is bigger than its short-run effect; accumulated FDI from Hong Kong has a positive impact on both employment in mainland and the fixed asset investment; the accumulated FDI from Hong Kong has a positive effect to output in mainland with a comparative high elasticity; accumulated FDI from Hong Kong has little contribution to the technology progress of mainland. And the last two points are the characteristics of FDI from Hong Kong's economic effect. At last, the paper proposed some policy suggestions regarding the FDI from Hong Kong. These policy suggestions are based on the situations of both Hong Kong and mainland and would benefit the development of both parties.