An Empirical Study On The Function Of International Trade And FDI To Economic Growth Of Rizhao City

Under the background of the economic giobalization,international trade develops rapidly and international capital flows quickly.Foreign trade and foreign direct investment(FDI) affect economic growth of developing countries and regions significantly.Empirical researches on relationships among foreign trade,FDI and economic growth have long been a hot issue in recent years.Since Chinese reform and opening policy especially the accession to the WTO, China has been actively developing foreign-oriented economy.Foreign trade is developing vigorously and expanding expeditely to a large scale.At the same time,a series of preferential policies have been launched to attract foreign investment,and FDI has gradually become the main method of utilization of foreign capital.The value of import and export trade is 2.2 trillion United States dollars in 2007, which quadruples that of 2001,the first year of China's accession to the WTO,and the average annual growth rate is 24.7 percent since 2001.China is one of the largest countries in which FDI flows.FDI stock excesses over 600 billion United States dollars.At the end of 2006,nearly 200 countries and regions invested in china.R&D center founded by foreign merchants is over 800 and more than 400 enterprises of TOP 500 invest in China.FDI has a significant impact on China's economic growth.Owing to economic conditions and variations of regional development,the function of foreign trade and FDI promoting economic growth is different.Therefore, the regional economic growth level and its influential factors are different.This paper limits research region to Rizhao City,Shandong Province,uses methods of theoretical analysis and empirical study,and establishes econometric models to carry out an in-depth study on the relationship among foreign trade,FDI and economic growth.Cointegration theory and vector error correction model are used as econometric methods to implement the smooth test,cointegration test,Granger causality test and variance decomposition to economic variables.Positive test results show that the relationship among GDP of Rizhao City,the total exports value,the total imports value and FDI has been stable and balanced.Each variable can impact on the others but constrained by the long-term stable relationship.Imports acts as a negative role while exports acts as a positive role to promote regional GDP of Rizhao City,which effectively supports the ELG(Export-Led Growth) hypothesis.At the same time,it indicates that Rizhao is an export-oriented city.FDI has a strong exogenous characteristic and has little contribution to economic growth.Granger causality analysis shows that exports and economic growth promote each other and have mutually causal relationship.The enlightenment of empirical study is that Rizhao City should clearly base on the current situation,see the gap,make full use of regional advantages,and unswervingly push forward the opening policy.It is necessary to develop foreign trade actively,optimize the structure of the import and export commodity,continuously expand overseas markets,and promote the transformation of the mode of foreign trade growth.At the same time,Rizhao city should make great efforts to improve the mechanism of utilizing foreign capital,focus on structural adjustment,vigorously attract foreign investment,and improve the quality and level of utilizing foreign investment so that FDI could become an important factor in economic growth in Rizhao City.