Empirical Research Of The Influence Of Finance Development On FDI Spollover Effect

Since the 1980s, china has attracted massive foreign capitals, and as a developing country, china has quite obvious gaps know as "the capital gap", "the technological gap" and "the thought gap" compares with the developed countries and it has been proved successful to promote the local economy through the attraction of foreign capital in china. The research indicated that there are three ways through which the FDI influence the economy: first, as "investment" to influence economic growth immediate; second, through influence the "the domestic accumulation of capital" to influence economic growth indirect; third, through influence technology productivity by "the technology spill-over effect", and finally to influence economic growth. And all those ways can be sum up as the generalized "FDI spillover". But the FDI theory pointed out that the FDI overflow effect is not unconditionally, there are many factors have great influence on this effect: the absorbance ability of the host country, the technological gap, the professional characteristic of the FDI and the local finance level and so on. It has been proved that the local finance level play important role in this process, a good local financial system will provide the convenience for enterprises in the flied of finance, and so enable the enterprises purchases the equipment and employ the workers which are essential for them to improve the technology and management. Also a developed financial level can help the domestic enterprises and the FDI enterprise establish a close cooperation relationship and so achieve a Swift growth. SO a good local finance level will promote and enlarges the "FDI spillover", and a bad one will hindrance or reduction it. Then how our country's situation can be? Through statistical description about our country's FDI and finance we find out that there are a high degree of concentration of FDI and a big develop gap of economic and finance between difference regions. For a better check about the relationship between the local finance develop level and the "FDI spillover", we chose six provinces and three cities where the FDI inflow most as our study objects. We will use panel—date model to study how the local finance influence the "FDI spillover" and we have tow conclusions: first, as a all, the local finance has a negative effect on the "FDI spillover" in these areas; second, we divide the time into two sections, and find out that the role of the local finance has experienced a change from negative obviously to positive but not obviously. And the role of the FDI to the economic experienced a change from positive obviously to not obviously. It can be seen from this conclusion that the FDI has promoted our economy growth, but as the FDI restrain our domestic investment more and more and our economical reforming, this kind of promote needs more and more limiting condition, including a good local finance level. As a result of local undeveloped finance, such as serious structure problems and low efficiency, the financial credits provide insufficient support to FDI and the FDI related enterprises, so hindered the FDI overflow effect. But along with the financial reform , the financial level in those area have been improved greatly and is getting more and more close the threshold over which the finance will play a obvious positive role in the process of FDI spill effect. As the financial level of the study area is better than the average level of our country, so this analysis result also is persuasive to the other areas. So what we need to do is continues the financial reform and improve the local financial level then it can play a positive role in the process of FDI spill effect.