Foreign Direct Investment In Empirical Analysis Of China's Economic Development

As an important means of product internationalization and deepening ofinternational specialization, foreign direct investment is becoming one of the mostimportant economic powers in the world increasingly. Much overseas researchindicates that not only it can affect host country's economic growth as a type ofcomplementary capital, but als0 its technological spillover effect is the great reasonwhy the host country wants to fetch FDI in.After China's Reform and Opening-up, the rate of absorbing FDI reaches at26.6% every year, and its scale is growing larger and larger. How to judge of theeffect that FDI impacts on technological progress in China is turning into a hotspot ofthe research of FDI.This thesis tries to make my own explanation for this controversy. Firstly, itdefines the meanings of technology, technological progress and technologicalspillover effect basing on the review of research results about the specialists all overthe world. Secondly, FDI variable is introduced to the framework of economic growththeory and its influence to China's economic growth is analyzed in both theoreticaland positive ways. We find that the effect of Foreign Direct Investment over China'sEconomic Growth should be divided into two parts: capital effect and technologicalspillover effect. Further more, we study the causality between foreign directinvestment and other factors accelerating economic growth by Granger causalityanalysis, and educe the mechanism how foreign direct investment influences China'stechnological progress. Finally, the conclusions and the policy suggestions about theutility of FDI in China are made.The innovation of this thesis is as follow. The first one is that FDI, as not apart ofcapital but an unattached variable, is introduced into the model of economic growth.The second one is that total factor productivity is divided into several sections. Thecausality between FDI and each section is analyzed and the mechanism how foreigndirect invest investment influences China's technological progress is found. The thirdone is that institutional change is regarded as important way for FDI to influenceChina's technological progress.