Study On The Relationship Between Foreign Direct Investment And Regional Unbalanced Development In China

Since the reform and opening up, the economy of our country has developed rapidly, known as the "Chinese miracle". Among them. Foreign Direct Investment(FDI) has played a very important role in China’s economic growth,During the period of 1978-1989, China’s total actual use of foreign investment amounted to only$11.758 billion,1990-1999 increased by $307,538 billion, by the end of 2013 amounted to$ 2,116.981 billion, expanded 180 times. However, the phenomenon of unbalanced growth of foreign direct investment in China has increasingly aroused people’s concern at the same time of rapid development. From the perspective of the regional distribution of foreign direct investment in China, in 2013, Foreign Direct Investment in the eastern,central and western regions of China respectively accounted for 64.1%,24.6%,11.3% of the total amount of foreign direct investment in China. From the view of region inside,70% of the eastern part total FDI concentrated in five provinces (municipalities),they are Guangdong, Jiangsu, Liaoning, Shanghai, Shandong. Unbalanced growth of foreign direct investment in China has seriously affected the coordinated development of China’s regional economy. Therefore, How to adopt the policy of foreign direct investment to reduce the imbalance of foreign direct investment in China is a major strategic task for China to implement the comprehensive coordination and sustainable development. In addition, the imbalance of economic development in the three regions is another problem in China’s economic reform. After the reform and opening up, China first open up 14 coastal cities, the opening of these cities has played a great role in its economic development, Especially for the eastern part.Per capita GDP in the eastern region rose from 723 yuan in1978 to 71,754 yuan in 2014, an average annual increase of 13.6%. The western development strategy implemented in 1999 also enabled the western region’s economic development rapidly, western regions per capita GDP annual growth rate is 13.8% during 1978-1999,and its per capita GDP growth rate increased to 15.2% during 2000—2014. However, due to the good economic foundation and the fast development speed of the eastern region, The economic development gap between the three regions is not reduced, During 2000—2014, the average proportion of the eastern region’s economic accounting for the total economy is 58%,the average proportion of the central region’s economic accounting for the total economy is 26%, and the average proportion of the western region’s economic accounting for the total economy is 16%. So to re-examine the impact of foreign direct investment on China’s economic growth and the factors that affect the regional distribution of FDI, which has important theoretical and practical significance for the efficient use of foreign direct investment to promote China’s economic growth.In this paper, we first review the literature related to this topic, and make a useful classification according to different subjects. The main body of this paper is divided into three parts:The first part, Use the method of Theil index to decomposition calculate the three major areas of China’s economic growth discrepancy and FDI distribution discrepancy. It concludes that regional differences in the concrete evolution. From the Theil index decomposition of the three major regional economic growth, the national GDP regional discrepancy showed an overall narrowing trend since 2000, the GDP regional discrepancy during 2000-2013 is mainly caused by the discrepancy among the regions and the inside of eastern region discrepancy. From the Theil index of regional discrepancy of FDI distribution can also be seen, in recent years among the three major regions, FDI distribution discrepancy showed a downward trend, and FDI distribution discrepancy within the three regions increased significantly. The regional discrepancy of FDI distribution during 2000-2007 are mainly caused by the discrepancy among the regions. The regional discrepancy of FDI distribution during 2008-2013 are mainly caused by the discrepancy inside the eastern and western region.The second part, Through theoretical analysis method, study the relationship between foreign direct investment and the unbalanced development of China’s regional economy Divided into two parts, the impact of foreign direct investment on China’s economic growth and the factors affecting the regional distribution of FDI. The influence of foreign direct investment on China’s economy mainly from four aspects, the development of foreign trade, technological progress, employment opportunities, capital formation effect. The factors that affect the distribution of FDI are mainly divided into four aspects: clustering effect, market factors, institutional factors, cost factors, and the regional distribution of FDI are analyzed in detail. This paper argues that the imbalance of FDI distribution will have a very important impact on the regional economic growth, capital formation, foreign trade development and regional employment and technological innovation; Regional economic development level, market size, infrastructure, labor cost, service industry development level, preferential policies are the key factors that lead to the discrepancy of FDI regional distribution.The third part, Through empirical test, study the relationship between FDI and regional economic development in China. The empirical analysis is carried out from two perspectives, one part is the effect of foreign direct investment to China’s economic imbalance development, using the fixed effect model.The other is the effect of regional economic growth on the regional distribution of FDI in China, because of the endogenous nature of the explanatory variables GDP, using the two stage least square method to carry out empirical analysis. The empirical results show that the role of FDI on eastern economic growth is greater than that of the central and western regions, and the FDI is much higher than that in the central and western regions, which directly pull the economic gap between the three regions. So the unbalanced distribution of FDI increases the unbalanced development of regional economy. The impact of non balanced growth in three major areas of China on discrepancy of FDI distribution during 2000 - 2013, the economic development level has significant difference in different regions, the central region has the greatest impact, the central regional GDP increased 1%, FDI inflows 3.15%;The eastern region of GDP per 1% growth, FDI inflows 2.78%; The western region was affected least, the western region GDP increased 1%, FDI inflows 1.896%. This shows that regional economic development imbalance is an important reason for the discrepancy of FDI regional distribution.