FDI And Agglomeration In Guangdong

Agglomeration is the most attracting geographical feature in the economic activities. Through the classification of different agglomeration phenomenon in the world, we can find out Foreign Direct Investment plays an important role in the formation of agglomeration in many countries or districts, typically in the developing countries. Since Guangdong is the leading province in carrying out China's Reform and Open Policy and one of the provinces attract the most FDI, it's essential for us to make an analysis on the FDI and agglomeration in Guangdong. This will be helpful to get a good knowledge of the situation of FDI,agglomeration and economic development in Guangdong. What's more, this analysis is good for the government in their choice of which way Guangdong economic should take.In order to test the correlation between FDI and agglomeration, we have to take two steps: First, we make a description of agglomeration condition in Guangdong. Second, we analyze their correlation. In this thesis, we first sum up the theories relevant to this topic. Then calculate the revised EG Index of 20 manufacturing industries of Guangdong from 2003 to 2007 after introducing some agglomeration index and the situation of FDI and agglomeration in Guangdong. Next, we carry out a correlation regression between FDI and agglomeration, using the least squares method and then test their correlation using Engle-Granger Cointegretion Analysis Method.The conclusion of this thesis shows FDI and agglomeration of Guangdong in 2003 to 2007 is rising generally. Meanwhile, through the empirical study of this thesis, it proves what have studied about the correlation between FDI and agglomeration in the country level is still workable in the province level, that is, FDI and agglomeration contribute to the progress of each other. Therefore, Guangdong should keep improving its ability in attracting FDI, especially those industries that has higher agglomeration impact, so that it can build a much better environment for the economic development in Guangdong.