Foreign direct investment in China: It's sectoral and aggregate impact on Economic growth

Agya Adi () and Ogbole Friday Ogbole

MPRA Paper from University Library of Munich, Germany

Abstract: This study focuses on the impact of foreign Direct Investment (FDI) on the economic growth of China via selected sector of the economy. The time frame used is from 1995 to 2010. Times series data drawn from the primary, secondary and tertiary sectors of the economy are used for the analyses. Ordinary least Square multiple linear regression Econometrics models are specified and estimated using E-views statistical software (version7). The Kwiatkowski-Philips-Schmidt-Shin (SPSS) unit root tests for stationary indicates that the variables are stationary at level. The result indicate that there is a negative relationship between FDI and Economic Growth in the primary sector but show a positive relationship in both the secondary and tertiary sectors. However, the aggregate FDI and economic growth shows a positive relationship. We recommend (1) FDI attracting economic policies with greater attention to the secondary and tertiary sectors of the economy; (2) FDI attracting economic policies should pay more emphasis on the secondary sector at the early stage of such policies as this sector exerts growth enhancing spillover effects on other sectors and industries is the economy; (3) Economic policies that de-emphasise FDI into the primary sector as this may exert negative influence on economics growth; (4) Human resource capacity building economic policies that would take advantage of technology transfers and managerial skills acquisition occasioned by such FDI, moreso that some corporations technically deprive the host economies ready access to their advance technologies.

Keywords: Foreign Indirect Investment; Sectoral and Aggregate impact; Economic growth in China. (search for similar items in EconPapers)
JEL-codes: O4 (search for similar items in EconPapers)
Date: 2013-12-15
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Published in Asian academic research Journal of social science & humanities Vol, 1.18(2013): pp. 23-35

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