Research Of The Relationship Between FDI And Economic Growth Based On Financial Market Development

In the background of economic globalization, more and more countries held apositive attitude toward foreign direct investment, so they actively attract foreigndirect investment. However, the effect of FDI to the host country has beencontroversial. In theory, foreign direct investment’s endogenous technology andknowledge spillovers can promote the host country’s economic growth throughimproving the technical level. But there also have some research results show that theintroduction of FDI can not promote economic growth. In addition, a country’sfinancial development level can play an important role to the introduction of foreigndirect investment, absorption and utilization. Foreign direct investment can affect theeconomic growth through the accumulation of capital and technology progress. Someof the results of the study show that only advanced financial markets can promote theuse of FDI of host countries, so as to promote economic growth.JiaoDong peninsula studied by this paper including the city of Qingdao, Yantai,and Weihai, is the most developed area of Shandong province, over more than60%offoreign investment in Shandong province. JiaoDong peninsula has convenienttransportation, a perfect infrastructure, rich human resources, good living environment,good invest environment. Due to the geographical location advantage, JiaoDongpeninsula attracts foreign investment from South Korea and Taiwan. There are manypeople research the relationship of FDI and economic growth of JiaoDong peninsula,but very few people research the relationship of FDI and economic growth under theinfluence of the financial market. Thus, this paper the empirical analysis is dividedinto two parts: one part of is the relationship between FDI and economic growth in noinfluence of financial market. The other part is the relationship between FDI andeconomic growth under the influence of financial market. Through these research canget some policy suggestions on optimization foreign investment, perfect the financialmarket, so as to promote the economic growth.This article establishes the appropriate the econometric model after theoreticalanalysis, the use of software JiaoDong peninsula financial market development, thenuse of software analysis the relevant data of financial market development, FDI andeconomic growth. The conclusion without thinking financial markets is: Theintroduction of FDI can promote economic growth in the short term, with the extension of time the promoting function of economic growth weakened graduallybecause foreign direct investment’s demand effect emerges. But after a period of time,the promoting function of the FDI to economic growth strengthened, the reason isforeign direct investment knowledge of spillover effect gradually played a role. Theconclusion thinking financial markets is: the development of financial market ofJiaoDong peninsula can not promote economic growth very well. According to theconclusions the relevant policy suggestions are given based on how to better attractforeign investment, how to improve the development of the financial marketproblems.