Study On The Relationship Among Financial Development, FDI And Economic Growth

With the accelerated process of reform and opening up, China’s economicdevelopment grows rapidly. China’s development attracting widespread concern, inthe meantime attracting a large inflow of foreign capital. Recently, the development ofChinese Financial Market has undergone tremendous changes. With the increasingpace of Chinese accession to WTO, the foreign trend is extending as well. Statisticsshows that the inflows of FDI growth recently, and the financial institutions and loansalso continued to increase. FDI and the relationship between financial developmentand interactions become many scholars study. What kind of FDI on economic growthplayed a role in the development of the host country for different financial absorb anyimpact of FDI, the difference extent of financial markets promote economic role ofFDI would produce a different kind of paper on the above issues are also deeplytheoretical and empirical analysis.This essay firstly describes and concludes theories and literatures from Chinaand abroad countries. Collecting and summarize the overview of the current situationon FDI, financial development and economic growth as the basic thoery, in order tohelp scholars empirical analysis of relevant data based conclusions. Meanwhile, basedonthe situation of FDI financial development of China’s financial devleopmentprocess, and the inspect of the status quo, in order to make a general theoreticalanalysis for this essay. combined with China’s provinces, municipalities andautonomous regions from1996to201015years of panel data on the factors involvedin the empirical inspection, concluded that China’s current level of financialdevelopment is not developed, especially in the western region of the level offinancial development on FDI absorption is inhibited introduction, each regionthrough increased investment in fixed assets, expanding foreign trade levels andcontrol of government and other measures of financial interventions, to promoteforeign direct investment increased purposes. This essay based on the analysis of FDIpromote economic growth conduction mode, making the conculsion that foreign direct investment through capital accumulation effect, competitive effect, learningand imitation effect, industry and other sources related effects have an impact oneconomic growth, but on the financial development of four areas: degree of perfectionof the financial markets, interest rate system, the level of money supply and financialintermediaries, the theoretical analysis of its role in promoting economic growth onFDI impact mechanism, mainly by increasing the capital stock, increase savings intoinvestment rates, flexible market rates, improve information symmetry, reduce risksimplicit way affect the relevant role. Then establish FDI, financial development andeconomic growth measurement model to investigate the actual situation of ourcountry; based on the mutual influence of the relationship between the role ofempirical analysis, one could make a conclusion that the level of financialdevelopment on foreigh direct investment and promotion of economic growthregulation is not very significant in China. FDI and dynamic financial markets havelittle effect for the host country, and in some area it weaked the impact on economicgrowth. China needs to develop ways other than through capital accumulation topromote economic growth, while encouraging and increasing the development ofadvanced technology and innovation, promote enterprise and social development ofits own, combining fixed asset investment, government spending and other channelsabundance of capital stock, long-term sustainable development opens road.