The Influence Of FDI To Economic Growth In Yangtze River Delta Area

As an important way of the current international capital flows, the role of FDIis moreand more important based on the global economic integration backgroud. In aspect of theory,FDI is recognized as a promotion to the economic growth in the host country. Not only FDIhas an impact on the capital generation in host country, but promote the economic growththrough technology spillover. However, in aspect of empirical research, the influence of FDIon economic growth is controversial. Then scholars begin to explore what are the factorsinfluencing the promotion of FDI on economic growth. It was not until the early21st centurythat financial development became a new perspective of research on FDI and economicgrowth.Along with the deepening of the reform and open up, China’s absorption of FDI isincreasing rapidly. As one of the strongest overall strength in China, Yangtze river has a bigproportion of FDI absorption in the whole country. Does it have a positive effect on localeconomic? Moreover Yangtze river is an area in terms of active economy, rapid developmentand in the leading position of regional financial development. Does financial developmentlevel influences the relationship of FDI promotion to the economic growth, and through whatchannels? Accordingly, this paper will involve financial development factors to study FDIimpact on economic growth in Yangtze river delta, and also the role it plays in therelationship.This paper takes the analysis of financial development effect in Yangtze river deltabetween FDI promotion and economic growth as its main line. Firstly the theoretical andempirical literature at home and broad are reviewed. Moreover, FDI and economic, financialdevelopment between FDI and economic growth are analyzed. Then this paper introduces thecurrent status and characteristics of FDI, economic growth and financial development inYangtze river delta, and comparison between “two provinces and one city” and country wide,and between Yangtze river delta and country wide are analyzed. Based on our nationalsituation and Yangtze river situation, this paper selects financial interrelation ratio and privatebank loan as the analysis index for scale and efficiency of financial development. After that,based on the theoretical analysis and data analysis, empirical mode is conducted. With thepanel data verification, the paper chooses the private bank loan index to analyze the channeleffect on FDI promotion to economic growth.This paper conclusion shows, in general, in Yangtze river delta FDI has promotionaleffect on economic growth. But the effect is not significant. Financial index that is financialdepth does not promote the positive effect between FDI and economic growth. While, privatebank loan ratio significantly promote the positive effect between FDI and economic growth.Furthermore, the financial development efficiency ratio of “two provinces and one city” inYangtze river delta area has different effect on the FDI promotion to economic growthchannel and effect. The financial development in Jiangsu and Zhejiang province haspromotion effect to economic growth via capital accumulation and technological progressannel. While that in Shanghai the effect mainly through technological progress channel. But there is a threshold that FDI has the promotion to economic growth via technological progresschannel. Currently financial development level in Yangtze river delta is low compared withlocal economic level and FDI scale. Only the financial development level goes beyond thethreshold, FDI have positive promotion to technological progress. Finally, combining thetheoretical and empirical analysis before, this paper gives the reasonable suggestions:improving the quality of FDI, optimizing capital structure; deepening the reform of financeand perfecting capital market; Optimizing the financial area layout, giving play to the role offinancial intermediaries. so that we can promote economic of angtze River Delta areabetter.