The Impact of Foreign Direct Investment and Industrialization on Economic Growth in China

Abstract

According to the data of the time series from 1980 to 2011 in China, through establish multiple regression eco nometric mod el, th is study c arried ou t t he causa lity t est based on un it root and c ointegration analysis to co nduct th e em pirical analysis o n the relatio nship b etween C hina’s forei gn direct investment ( FDI), industrialization and economi c growt h. The result s show that: First, t he foreign di rect investment has a sig nificant effect on ec onomic growt h; s econd, indu strialization is negatively related to economic growth; third, in the long run, the proportion of the secondary industry output value a ccounting fo r r eal gross do mestic p roduct ( GDP) ma kes a neg ative cont ribution to economic growth. Go vernments sho uld devote their efforts to deve loping th e tertiary in dustry, meantime, to attract more FDI to China, should encourage more domestic investment, ensure political stability and make guided openness of t he economy the watchword in this era of global liberalization to trade and FDI policies in order to make FDI growth enhancing and economic growth in China.