Analysis On FDI Affecting Economic Growth In Chengdu-Chongqing Economic Zone

Since 1978 carrying out the reform and opening up policy,China has attracted more and more foreign direct investment (FDI). Generally speaking, Foreign capital inflows have been considered as a new engine for the sustainable economic growth. With implementing the west development strategy, China join the Chengdu-Chongqing economic region into the state development first draft of "Eleventh Five-Year Plan" in 2005. Chengdu-Chongqing economic zone will be one of the most powerful regional urban zones after Chang Jiang-triangle economic region, Zhu Jiang-triangle economic region, Beijing-Tianjin economic region and the Northeast traditional industrial Bases. This zone plays a significant part in the development of the west economy, and coordinates the unbalances economic development in China. Investigating the effect of FDI on regional economic growth, can help us to formulate a rational FDI policy, to accelerate the economic development of west region and to realize the harmonious development of Urban-Rural development.The first part is made up of a review of related theories. The second part is a description of the changes in foreign direct investment in the western China. And than make a deep analysis about the FDI present situation separately from the total quantity, the local distribution, the industry distribution and source countries of the inward direct investment in the Chengdu-Chongqing economic zone from 2000 to 2008.The third part is an theoretical analysis on the independent influence of FDI on the economic growth. This study asks two central questions:the one is how we can explain the causality relationships between economic growth and FDI in Chengdu-Chongqing economic zone; and the other one is how much the contribution of FDI affecting on the each part of the zone. Than through test of Cointegration and Granger Causal Relation, this part quantity obtains a causality only economic growth causes inflow of FDI. A Panel date model is developed to test the other hypothese based on time-series and cross-provincial data of observations (32 provinces for 9 years,2000-2008).The results confirm that the effect of FDI on economic growth is weaker than the domestic investment except for Shuang Qiao region.Therefore, in the future when our government makes use of FDI. we should fully recognize the significantly higher effect of absorption region, and moreover, we improve our economic environment. Only in this way China could eliminate dualistic economic structure and ensure a harmonious development and a long-term economic growth.