Financial Deepening Moderating Effect Of FDI Technology Spillover And Regional Economic Growth

Since the reform and opening up, China’s trade with the world has become increasingly close. The amount of FDI increased a lot. FDI is an important source of technology innovation and capital supplement, it has remarkable contribution to the regional economic growth. But the contradiction between FDI and China’s imperfect financial market became worse. FDI took over domestic enterprises’ capital and financial resources. In recent years, local governments’ Regional Financial Reform was effective. Many financial centers were built up and the financial deepening degree increased apparently.To verify the importance of financial deepening degree of FDI spillover effects, this paper establishes a standard three-sector endogenous growth model, including a new financial deepening degree of variable, and introducing a new net present value function of the intermediate products and the financial market efficiency of capital allocation function. To study how the financial deepening degree effects the production efficiency of the intermediate products divisions and the final products divisions, and then affects economic growth. Based on our panel data’s regional and time-phased estimation of China’s 30 provinces except Tibet during the period of 1997 to 2012, we can explore the institutional reasons behind the coefficient differences. The empirical results show that the financial deeping of different regions makes the interaction between the financial deeping degree and FDI have different spillover in different areas and periods. Finally, we propose rationally introducing foreign capital, formulating financial deepening policy to change the local financing structure to gain positive spillover effects of FDI.