A Study on FDI’s Crowd-out Effect on China’s Domestic Investment

Abstract: When FDI keep increasing considerably in China, it has contributed to the fast-paced growth of China's economy. On the other side, FDI exerted a crowd-out effect to the domestic investment in China, which affected China's economy adversely. With an econometrics model, this paper tried to disclose the relations among FDI, domestic investment and capital formation. This paper also explained the cause and the procedure of the crowd-out effect.In the paper a general investment model was established, though which the crowd-out effect in both regional sense and national sense was examined statistically. Based on the statistical results, the mechanism and the cause of crowd-out effect was analyzed in multiple aspects. The practical impacts on the state-owned enterprises, national industries and national brands were also presented in this paper. To eliminate the crowd-out effect, advices to enterprises, industries and local governments were given in the last part…
Key words: FDI ; Domestic Investment ; Crowd-out Effect; Market internalization

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