International Industrial Capital Flows And Economic Growth

With the accelerative development of world economy towards the globalization, Foreign Direct Investment (FDI) has become one of the main ways by which capital flows from one country/area to another. FDI flow & stock have being increased rapidly, which brings great effect on every country. The paper studies FDI effect on economic growth and consists of four chapters. The first chapter summarizes the connotation, the development process, the present characteristics of FDI and the status of China FDI inflows. This part also sums up the theoretical mechanism of FDI effect on short-run output of equilibrium and long-run economic growth under open economy. The second chapter, according to Keynesian theory of Efficient Demand, indicates the relation between FDI and aggregate demand by discussing how FDI promotes the investment demand, the net export demand and the consumption demand. The third chapter points out the impact of FDI on the industrial structure, namely on the proportional structure transformation of three main industries, the forming of leading industry and the rational industrial distribution, taking Japanese, Asian our dragons?and China as examples. The fourth chapter analyzes how FDI improves long-run economic growth. First this part compares positively the FDI Dependence Degree on GDP of different countries which are in different developing phases. Second, the part studies FDI inflows?and outflows?effect on K, A, L gradually according to the production function Y=f (K, L, R, A), where Y=output, K=productive services, L=labor inputs, R=natural-resource inputs and A=technology. Finally the author provides the relevant suggestions about using future FDI in China. The paper makes some innovations on discussing the relation between FDI and economic growth by systems analysis, studying FDI effect on investment demand and consumption demand, explaining the realization mechanism of FDI technology spillover,etc.