The Study Of Relationship Between Foreign Direct Investment And Economic Development Of Henan Province

China has experienced a sustainable and rapid development of economy for over 30 years since the reform and opening of China began. Foreign direct investment, which is an important way of foreign economic and trade, plays an important role in economic development of China, especially for eastern coastal cities. In the 21 st century, because of the development of the reform and the step of economic globalization getting faster and faster, economically, for China, international cooperation becomes more and more frequent, and China becomes the second largest economy in the world, after the United States. In this period, influence of foreign direct investment on Chinese economic development has become more visible.In recent years, because the economy of Chinese eastern coastal cities has reached a certain scale, the district that the transnational corporation chooses to invest changes, which means foreign direct investment, to some extent, has transferred from eastern coastal cities to inland cities. Foreign direct investment of Henan Province, one significant province in central part of China, has kept continuous growth in recent years. So there is one problem along with it, a problem about the relationship between foreign direct investment and economic development of Henan Province. This dissertation attempts to analyze the relationship between foreign direct investment and economic development through the way of combination of normative analysis and positive analysis, the dissertation also gives some suggestions based on analytical result.Firstly, This dissertation summarizes the background, significance, context, thought and innovation of the topic and reviews the research on the relationship between foreign investment and economic development at both home and abroad, and then the dissertation introduces the relative theories of foreign direct investment in detail, aiming at laying a theoretical foundation for the research on the relationship between foreign direct investment and economic development. Relative theories include Specific Advantages Theory, Product Life Cycle Theory, Internalization Theory, Double Gap Theory and Transnational Corporations Engine Theory.Secondly, this dissertation analyzes the relationship between foreign direct investment and economic development through the way of combination of normative analysis and positive analysis. In normative analysis part, the dissertation introduces the development history and present situation of foreign direct investment in Henan province, then it analyzes the influence factors of foreign direct investment and the mechanism of action of foreign direct investment to economic development for Henan province. For the influence factors of foreign direct investment, the dissertation provides practicable analysis on Henan Province from five aspects, labor cost, economic scale and stability, the level of opening-up, the level of urban infrastructure construction and policy direction. As a result, it finds that, for Henan Province, economic development has a positive effect on foreign direct investment as it serves to increase the level of economic scale, economic stability and opening-up. For the mechanism of action of foreign direct investment to economic development, the mechanism of action has been analyzed from 4 respects, capital effects, industrial structure effects, transfer and overflow of technology effects and employment effects. Finally, it finds that foreign direct investment promotes economic development of Henan province, but, for Henan province, the effect of foreign direct investment on economic development has been limited, due to some factors such as the location.In positive analysis part, the dissertation analyzes the relationship between foreign direct investment and economic development practically based on VEC Model, impulse response function, variance decomposition methods and the data about foreign direct investment and gross domestic product of Henan province from 1993 to 2013. The result indicates that foreign direct investment and economic development interact each other, and the effect of economic development making on foreign direct investment is greater than that of foreign direct investment, which is consistent with that of normative analysis part.Finally, the dissertation offers some corresponding proposals according to analysis above. Measures should be taken to ameliorate the orientation of the region, structure and source of foreign direct investment, which are aimed at solving the cycle’s own problems to increase its efficiency, the cycle that foreign direct investment and economic development form. Moreover, more attention should be paid to education in order to improve the quality of laborers, and investment environment should be meliorated in order to offset the disadvantage of location of Henan province, which is aimed at increasing the strength of the cycle.