The Analysis Of The Impact Of Foreign Direct Investment On China's Economic Development

Since the reforming and opening up in 1978,foreign direct investment begined inflowing into China. From 1979 to 1992, foreign direct investment inflowing into China has been hov -ering at a low level. After China established the policy of building a socialist market econo -my in 1992,the inflow of foreign direct investment into China is increasing rapidly. In 2002, China attracted＄52.74 billion foreign direct investment,becoming the country with the worl -d's largest inflow of foreign direct investment. In 2008,inflow of foreign direct investment into China rose to＄94.2 billion,ranking first in the world for six consecutive years.From the view of conventional economics, foreign direct investment has very important positive effect on economic development in host country,can signif -icantly stimulate the host of trade, investment growth and enhance the efficiency of the host country production. In gen -eral,foreign direct investment has advanced production, technology, management experience and a wealth of international marketing network, invests in the host country as spillover effect occurs in the production process.Through imitation, communication, staff turnover with fore -ign direct investment enterprises, domestic enterprises can learn foreign advanced technology, management, use its international marketing network to expand the international sales of our products ,enhance our management level of enterprise technology, improve product export structure. However, some domestic scholars think that ,foreign direct investment not only has a positive impact on China's economic development, but also has negative effects on incre -asing China's regional economic disparities, inhibiting innovation, outing local investment, and the force of the negative effect has surpassed the positive effect.In order to comprehen -sively analyze the impact foreign direct investment has on China's economic development, this article analyzes from the theoretical and empirical angles.First, based on making a brief introduction about foreign direct investment, the paper analyzes the profile and role of foreign direct investment in China.Secondly, in order to make more specific explaination about foreign direct investment's impact on China's economy, this article has done empirical analysis from three perspects: inve -stment, trade and innovation, which have greatest impact on China's economy. The paper tests the impact foreign direct investment has on China's foreign trade, investment and inno -vation respectively, such as to determine the extent and nature of the impact of the foreign direct investment on China's economic development by ADF unit root test, cointe -gration test. And, based on the cointegration, the paper builds error correction model to further analyze the impact foreign direct investment has on China's foreign trade, investment, innovation. It con -cludes that, foreign direct investment has important positive effect on improving China's export structure, increasing net exports, stimulating domestic investment, promoting China's innovation.