An Study On The Impact Of FDI On Resident Income Gap Of China

Since China implemented reform and open-up policy in 1978, our country has made great achievements in the utilization of foreign direct investment. In 1980 China approved the first foreign enterprise that invested in China, which started our Country's prologue of using FDI. According to the published data by World Investment Report 1995, China has become the world's second largest FDI recipient county which only after the United States and NO.l in developing countries located in 1993. In 2002, China has even exceeded the United States as the world's largest FDI recipient county.FDI is an important reasons for explaining China's economic growth.But another phenomenon also significantly emerges along with the rapid development of the utilization of foreign capital in China and this phenomenon is the rapidly growing income gap between residents in our country.According to the data released by the World Bank, Gini Coefficient of our country which reflects the income gap between residents in a country raised beyond 0.4 in 1995 and also has trend to rise higher. This article analysises the impact of FDI on resident income gap in our country theoretically and empirically on the basis of above observation. This research is expected to help us understand the relation between income gap and FDI and help the government to make policies to construct a socialist harmonious society.This paper can also provide some references for future researchers.According to logic, this paper divided into the following five parts:The first part is the first chapter: introduction. This part firstly discusses the-background and the significance of the selected subject.Then reviewed and researched related literatures at home and abroad systematically.The second part is the second chaptenthe current situation analysis. This part firstly defined the concept of FDI and income gap then analyzes the status and situation of FDI and income gap in China. The study found that FDI in China mainly distributed in the eastern region and the second industry and the whole resident income gap and income gap of urban and rural,regional income gap and industrial income gap all presented rising trend.The third part is the third chapter:theoretical analysis. This part derived the mathematical expression of the income gap of the host country which is an closed economy through mathematical model and then derived the mathematical expression in open economy which is assumed to receive only FDI,at last derived the influence on the host country by FDI by compared these two kinds of circumstances.The implication of this theory model is:in the short term FDI will increase the income gap of the host country but in the long run will probably ease the income gap of the host country, that is to say the income gap and FDI may present reversed U curve relationship. Then analysis the three main transmission mechanism--employment effects, industrial structure effect and trade effects of FDI impacting on resident income gap in recipient county.The fourth part is the fourth chaptenempirical analysis section.On the basis of the previous studies, this part had put forward an estimating model including multiple variables, and the measurement model of using this model to estimating income gap in urban and rural,regional income disparity and industrial income disparity.The result shows: the influence on the income gap of our coutry by FDI presented inverted U-curve shape,but widened the income gap of China's different regions, and narrowed the industrial income gap in China.The fifth part is the fifth chapterxonclusions and suggestions.This part summarizes the main research conclusion of this paper, and puts forward some relevant policy suggestions, including leading balanced distribution of FDI in rural and urban,regions and industries in our country,implementing active fiscal policy and income distribution policy,speeding up economic development to reduce unemployment,ect.