Fdi Inflows,Foreign Trade,And Government Final Consumption—Based On Empirical Research After China's Reform And Opening Up

Since the reform and opening up, along with the increasingly close relations with world economy, China is using more and more foreign direct investment. As an important source of capital supplement and technological progress, foreign direct investment in China's economy plays very important roles. Good and health development of a country's foreign trade will help to promote economic development, make domestic enterprises go out, increase the employment of domestic workers, and create more national taxes. Meanwhile, foreign trade, participating in the international division of labor and saving social and labor cost, not only makes the national resources fully utilized, but also ensure and accelerate social reproduction. Government consumption expenditure is an important part of government spending, as an important means and ways for the government macro-control, it plays a crucial role in the economic development of a country.Foreign direct investment, foreign trade and government spending is indispensable on China's economic development, therefore, based on China's economic data from 1982 to 2013, this paper uses Johansen cointegration test, VEC model and Granger causality analysis model to analyze links between FDI inflows, foreign trade and government final consumption. The goal is to discuss whether the direct investment inflows have a short-term and long-term effect on China's foreign trade and government final consumption, furthermore, to analyze possible causes and the corresponding policy suggestions.The results of the study shows that, first, there exists an equilibrium relationship links to the two effects, the short-term negative effect and the long-term positive effect between the direct investment and government final consumption, namely the FDI inflows in the short term will hinder the government and social consumption, in the long term are conducive to government agencies to provide public services. Second, in the short-term there is a trade-off relationship, but a complementary relationship for a long time between FDI and foreign trade. At the same time in the long term, direct investment inflows will increase our trade imbalance. Third, rapid development of foreign trade can promote the government consumption expenditure in the short term, On the contrary long term shows the opposite state. That means foreign trade development may block final consumption of residents in the short term and impede the government final consumption in the long term, which is In line with the economic law. Therefore, first of all, institutional innovation is needed in the process of China's economic transformation and upgrading, thus can make the government play a crucial role in the allocation of resources and the market gradually play a decisive role. Second, actively guides high quality inflows of foreign capital, makes effective regulations to foreign investment, rational allocates government spending, increases level of spending power, transforms internal imbalances and promotes external balance. Those ways are the promise of economic sustainable and effective development. Finally, private enterprises need to change their ideas, correct view of foreign capital actively and make use of foreign capital to push technology development. They should recruit skilled talents, cultivate high-quality employees and improve the ability of independent research and development. In the meantime establish a strong corporate culture which makes the private enterprises have more advantages in the fierce competition in the future. As a result it can make greater contribution to the further development of China's economy.