Empirical Study Of The Relationship Between Entry Mode Of FDI And Economic Growth Under New Situation

Currently, the government releases large amounts of liquidity through the reduction of the reserve rates and interest rate, pushing up asset prices, large enterprises can often obtain a lot of money from the capital market and indirect channels such as banks. Meanwhile, foreign assets become cheaper as a result of the financial crisis and the European debt crisis. This also led to the emerging of Chinese funded enterprises executed mergers and acquisitions overseas, meanwhile, China has become the country that absorbs the most FDI, the role of FDI for the economic growth of the host country has become a hot issue with practical significance.However, the academic research with the relationship between FDI and economic growth is always focused on the total volume, ignoring the structure of FDI. Actually, when a cross border company is entering another country, it could choose either Greenfield investment or cross border M&A. Green investment is a direct investment to establish a new enterprise plant, which could also be called as create investment, and cross-border M & A is the enterprise factory already exist in the host country, these two different FDI entry modes have essential differences, also the economic impact of different entry mode to the host country's is different. The research aim of this paper is focused on the economic impact of different modes of FDI: green land investment and cross-border mergers and acquisitions to the host countries.This paper intends to use no less than 40 countries and regions, nearly 10 years of data for the empirical study. The samples chosen would be representative and have close relationship with China. In the model, the controlling variables would include GDP, GDPpc, Population, Open, Nexp. GDP would control the size of the country, GDPpc would represent the wealthy extent, Population would control the supply of labor, Open would control the proportion of the export oriented economy to GDP, Nexp would control the growth rate of net export. In these variables, GDP, Population and GDPpc would use the absolute value, other variables would use the growth rate data. In the paper, the developed extent of the financial market and stability of institutional environment is considered as the key element to promote the FDI transforming into inner investment to boost economic growth. Based on the result of the empirical research, the paper discovers some more general principles. That is in developed countries, both cross-border mergers and acquisitions and Greenfield investment can promote economic growth; in the developing world, only green investment can promote economic growth; in developed countries, FDI has stronger promotion to the economic growth compared with endogenous investment, and M&A would have a more prominent effect than Greenfield investment; in developing countries, there is no difference in FDI and endogenous investment in promoting economic growth. In the end, as there is big difference in different regions in China, the paper would like to propose some policy suggestions.