The differential impact of foreign direct investment on regional GDP growth in China

Yufeng Xiao1, Shuqing Xiao2, Yanxing Xue 3, Zuoteng Wang 4
1Institute for Advanced Studies, Universiti Malaya, Kuala Lumpur, 50000, Malaysia
2School of Modern Service Management, Shandong Youth University of Political Science, Jinan, Shandong, 250000, China
3Faculty of Education, The National University of Malaysia, Kuala Lumpur, 50000, Malaysia
4Institute for Chengdu-Chongqing Economic Zone Development, Chongqing Technology and Business University, 400067, Chongqing, China

Abstract

Foreign direct investment plays a more important role in China’s economic development. This paper examines the impact of FDI on China’s GDP and analyzes regional variability through OLS and quantile regression models. Then the spatial correlation-Moran, I scatter plot is used to visualize the clustering pattern of regional units. The analysis shows that FDI has a significant positive effect on China’s high economic growth at the 25% quantile. However, the higher the economic growth rate, the margin of positive effect of FDI on economic growth gradually decreases. China’s regional economic development is characterized by a dualistic structure. The elasticity coefficient of FDI in the eastern region is 0.099, and that in the western region is 0.05. Therefore, FDI has a greater impact on the eastern region than on the western region. With the development of China, foreign investment began to discrete, gradually spreading from coastal areas to inland areas.

Keywords: quantile regression model, Moran, I, foreign direct investment, OLS