Economic Growth Effects Of FDI And OFDI In The Service Sector

With the improvement of the level of economy, the share of service sector in the national economy will grow. The government had clearly made the importance of major service industry, thus the development service will play a big role in the economic restructuring. Along with speeding up the process of capital liberalization, direct investment inflows and outflows has become a leading industry in international capital flows. Many scholars have studied the relationship between direct investment in the service sector and economic growth, but the conclusion is different. Whether FDI and OFDI will have a positive impact an on economic output? and what the mechanism services should be ? All these issues need to be further studied.This study is about how the two-way direct investment in the services sector affecting the economic growth. First, we have made an introduction of previous studies on this topic and summarize what they say about the correlation between FDI and economic growth. Based on previous studies, we clarified my ideas for this article. Then a descriptive analysis on foreign direct investment inflows and outflows has been made.Then, we study the endogenous growth theory. Based on previous given research we set up an equation services including the FDI, OFDI and economic growth variables. Other control variables such as trade, industry structure, and human capital also have been added in order to analyze mechanisms and channels of services FDI and OFDI impact on economy. Finally we concluded, foreign direct investment and foreign direct investment services can effectively promote economic growth, but the channels of industrial upgrading and human capital accumulation is not perfect, unable to effectively promote an increase in output.