An Empirical Study On The Function Of FDI And International Trade To Economic Growth Of Hubei Province

Since1980’s, especially during the recent decade, the economic of Hubei province isdeveloping very fast, meanwhile the amount of international trade and FDI has madeimpressive progress than before. GDP of Hubei province is1959.419billion Yuan in2011,which is13.8percent higher than2010. The secondary industry made the outstandingprogress in all their industries, marking a growth rate at17.9%with the total amount of981.871billion Yuan. The total amount of import and export was33.519billion Yuan which is29.1percent more than that of2010, in which, the total export amount is19.535billion Yuanwhile the import is13.984billion Yuan with a growth rate of35.3%and21.5%respectively.The real FDI was4.65billion Yuan with a growth of14.9%.Taking an overview around China, Chinese rapid economic growth benefitted fromtrading with foreign countries. Meanwhile, the total amount of FDI China absorbed hasalways placed secend only after the USA. The FDI surged into China has significantlyreleased the restriction of lacking of capital and technologies. It is undeniable that trade andFDI has promoted Chinese economy significantly, especially in easten and coastal area ofChina. But whether or not there is necessary connections between the rapid growth of trade aswell as FDI and the rapid economic growth in Hubei province, the patern how trade and FDIaffects the econmic growth in Hubei Province remain problems that’s worth researching. Thispaper will discuse these problems based on relative datasets of economic growth and tradetogether with FDI in recent30years of Hubei province. Then analyse the correlationshipswith an empirical researche based on VAR model.This paper firstly summarises the results of researches by scholar both domestic andforeign on the relationships between trade, FDI and economic growth, then summarises therecent theories of relationships between the three aspects. Finally, this paper utilises the VARmodel together with Granger test of causality，Generalized impulse response function andVariance decomposition model, to analyse the tendency of development of trade and FDI aswell as economic growth, and come to a conclusion that, trade is the reason of economicgrowth in Hubei province, but FDI donot promote Hubei economy significantly.