Research On The Impact Of Financial Market On OFDI To Promote Economic Growth

OFDI is the main way of a nation or regin’s economy to take part in today’s international competition and has replaced international trade as a new engine of the world economic growth.China is in an important period of economic transition. The outward foreign direct investment of enterprises can absorb advanced technology, improve the bottlenecks of lacking strategic resources, and promote the upgrading of the industrial structure. Those process have very important significance to promote the transformation of the domestic economy. With the rapid growth of the number and the scale of foreign direct investment in China,in this paper,we study the role of financial markets in the process of OFDI promoting economic growth based on the Functional Financial Theory.This article will analyze the influence mechanism of the civil financial market in the process of outward foreign direct investment promoting the home country’s economic growth from the perspective of financial function based on related research and the current situation of OFDI and use empirical research to test the relationship between them. Empirical research is divided into two parts. The first part useing DF-GLS unit root test, cointegration test and Granger causality test verify the relationship between OFDI and economic growth, and financial markets is OFDI an important factor for economic growth based on time series data.The second part is the panel data research.Due to regional differences in the development of outward foreign direct investment and financial markets,this article will divide the hole country into east, middle and western regions and use panel model to detect the impact of the financial markets in the three regions on the process of outward foreign direct investment promoting the economic growth of the region.By taking into account the comparative analysis with cross terms and without cross terms, it is concluded that the financial market plays a role in the process of OFDI promoting economic growth.In view of the negative effect of the financial market, this paper analyzes the reasons from two aspects of China’s foreign direct investment and the development of China’s financial market.This paper selects two diffenent aspects indicators of financial market on its scale and efficiency, and uses Factor Analysis Method to calculate the comprehensive level of financial market.Not only the various indicators were returned to examine the effect of financial scale and financial efficiency,but also the role of comprehensive development level of financial market will be examined. The empirical results show that even in the eastern region which has the most developed financial markets and the largest number of outward foreign direct investment that financial market have not played a significant positive role in the promoting economic growth.Finally, this paper provides the corresponding policy recommendations from improving the financing conditions of private enterprises, broadening the financing channels for private enterprises, promoting financial innovation, enhancing the policy of financial support etc.for the reform of financial markets to promote the further development of the financial market and promote the economic growth accelerating effect of outward foreign direct investment.