The Interactive Effect Of Industrial Agglomeration And Using Foreign Capital Of Hunan Province

Since the reform and open policy, foreign direct investment has played aconsiderable role in China’s economic development process, industrial agglomerationhas become the important factor of regional foreign direct investment. More and morestudies focus on the relationship between the two in order to search the new way ofindustrial upgrading and economic development.In recent years, the economic of Hunan province developed rapidly and hasformed a large number of competitive industries, investment scale expandsunceasingly because of the improving investment environment. Taking Hunanprovince as the research object, this article mainly analyzes the relationship betweenindustry agglomeration in the region and the utilization of foreign capital. First wereviewed the related theoretical research and empirical research both at home andabroad about industrial agglomeration and foreign direct investment, and probes intothe mechanism of the interaction between the two, then analyzed the industrialagglomeration status in Hunan province from the angles of regional and industrial,and measured the industrial agglomeration level of20industries through the locationentropy and industrial concentration index, and has carried on the division of differentconcentration degree of industry; At the same time analyzed the present situation offoreign capital in Hunan province from four angles such as source, regional, industrydistribution and types of investments, by contrast, we found that industrialagglomeration and foreign capital in Hunan province are unbalanced both in regionaland industry, there is a more complex relationship between the two.In order to further test the interactive relationship between industrialagglomeration and foreign investment in Hunan province, this paper uses the data of20industries from2004to2012to establish a panel model and carried on theempirical analysis to check two assumptions: if the industry cluster can effectivelyboost the growth of foreign investment in Hunan province, if the use of foreigninvestment can effectively promote the formation and development of industrialagglomeration in Hunan province. The empirical results show that foreign directinvestment in Hunan province can promote the formation and development ofindustrial agglomeration, but the industrial agglomeration is not the choice factor offoreign direct investment, it does not accord with theoretical research. According tothe actual situation of Hunan province, the paper illustrates the problems and put forward the corresponding countermeasure and the suggestion.