A Study On The Effect Of Foreign Direct Investment To The Increase Of Our Country’s Economy

Since the reform and opening up, the economy of our country has developed rapidly, andthe rapid development is rare in the world, known as the “Chinese miracle”. Foreign directinvestment plays an important role in the back of the rapid development. By the end of2012,the total actual investment amount of foreign direct investment has been$1.276108trillion,and foreign direct investment has become the main form of foreign investment in China. In thebackground of the current strategy to implement a comprehensive, balanced and sustainabledevelopment of our country, the rethinking of the impact of foreign direct investment toChina’s economic growth has important theoretical and practical significance.The paper studies the effect of foreign direct investment on China’s economic growththrough theoretical analysis and empirical analysis. The empirical analysis from twoaspects, one is the relation between foreign direct investment and economic growth of ourcountry, using co-integration test, Granger causality test and adding lagged variables test;another is the role of foreign direct investment in China’s economic growth, mainly basedon the endogenous of foreign direct investment, using the analytical framework ofsimultaneous equations. The empirical results show that: either the test of the relationshipbetween foreign direct investment and economic growth, or the study on the direct impactof foreign direct investment as an independent capital to economic growth, they haveproved that foreign direct investment has a positive role in promoting China’s economicgrowth; foreign direct investment in China has no significant capital crowding andsignificant technology spillovers;China’s economic growth and market openness haveobvious attraction to foreign direct investment. Finally, according to the results of theanalysis, suggestions are given for further utilization of foreign direct investment topromote China’s economic growth.