A Comparative Study On The Relation Between Inter-regional Capital Flow And Regional Economic Growth Difference In China

Along with the deepening process of China’s market economy and the transferand adjustment of China’s regional development strategy, the scale, direction andspeed of regional capital flow in China are constantly changing. Regional capital flownot only affects regional economic growth level, but also serves as an importantfactor leading to regional economic growth gap. To make comparative study inregional economic development gap from the perspective of capital flow and to betterplay the adjusting role of capital flow in promoting balanced regional economicdevelopment are of great importance in narrowing the regional development gap andpromoting the sustainable, coordinated and healthy development of China’s societyand economy. With the impact of inter-regional capital flow on economic growth indifferent regions of China as the object, the purpose of this paper is to study therelevance between capital flow and regional economic growth difference.In the first part, this paper collects relevant theories on capital flow andeconomic growth and summarizes all these theories. Then, with a brief introductionof division of economic region in China, this paper, analyzes the current situation anddifference of both the capital flow and regional economic development in eastern,central and western economic region. Based on the analysis of capital flow, this paperanalyzes the reasons leading to the difference in regional economic growth.In the next part, with the comparative analysis of relevant index, this papercreates a rational theoretical model and hypopaper on the basis of relevant theory ofcapital flow and economic growth. Moreover, by using static panel data model anddynamic panel data model, this paper conducts an empirical study on relationbetween china’s regional capital flow and regional economic growth during1996to2010, static panel data model and dynamic panel data model. The empirical studyfound that in central region, fixed asset investment and per-capita GDP is positivelycorrelated. The reason is that the capital input in central region showed more signs ofthe crowding-out effect in private investment. The empirical study also found out thatin labor force, however, the population aging in western region and per-capita GDP isnegatively correlated. The possible reason is that the capital elements in western region, under the attraction of high return rate of capital, moved to central and easternregion, and with capital outflow, the western region lost its labor age population,which, in turn, hindered the improvement of labor productivity.In the last part, this paper puts forward its countermeasures and suggestions asits conclusion. The countermeasures and suggestions are as follow：to optimize theinvestment environment so as to improve the efficiency of capital flow; to set upregional industrial investment fund so as to support the industrial development inwestern and central region of China; to insist on promoting the healthy urbanizationconstruction in western and central region of China according to their own situation;to enhance opening to the outside world so as to attract capital inflow; to improve theadjusting mechanism of policy so as to provide a reasonable guidance of capital flow.Therefore, through these ways, we could enhance the efficiency of regional capitalflow, and, on the other hand, narrow regional growth gap and push the coordinatedand sustainable regional economic growth and development.