Economic Growth And Foreign Direct Investment Relationship

FDI is a big hit nowadays. In this paper, the author inquiries the effects of FDI on Chinese economic activities in the following aspects: examining its capital supplier role in Chinese modernization construction, analyzing its effect of technological spillover and probing its improvement for Chinese economic structure by means of number and chart, while the conclusion is not so optimistic as many people thought, then the author points out that one positive effect of FDI is providing advanced management experiences and propelling the market economy institution for China.In the second chapter, the author analyzes the reasons that FDI moving toward China from the angle of supply, I illustrates the reasons that FDI flow into China from the point of view of theory, then I put out that there are three realistic reasons that push the FDI flows into China, which are labor cost, big market and transaction cost.In the following chapter, I enumerates the two ways of FDI flowing into a destination, i.e. setting up a new factory and merger & acquisition, at the same time the author compares the advantages and disadvantages of the two ways so that to put forward a more reasonable police for the better use of FDI.In the fourth chapter, the author demonstrates the relation between Chinese GDP and FDI flow in China by means of macroeconomic analysis model, the reasons which the author mentioned in the second chapter and the co-integration relationship between DFDI and the growth rate of Chinese GDP, based on the answer the author suggests that the government not give the tax exempt for the foreign investor, to gain larger FDI the best way for the government is providing a better investment environment.The last chapter is the conclusion of the paper, based on the analysis in the thesis, the author suggests that there are four types of relationship related with the FDI, with which the government should concern and which maybe affect the future growth of Chinese economy. These relationship include: the human capital and material capital; the coastward area and the hinterland area; the private capital, the state-owned capital and foreign capital; the short term capital and long term capital, these four types of relationship may effect the economic sustainable growth in the near future for China.