Foreign Direct Investment Spillover Effect on China’s Sustainable Development

Abstract

Abstract The unbalanced growth of FDI in China has seriously affected the coordinated development of China’s regional economies. Therefore, to achieve comprehensive, coordinated and sustainable development, China’s main strategic task is determining how to adopt positive and effective FDI policies to reduce this regional imbalance in FDI. The purpose of this paper is to explore and study the spillover effects of foreign direct investment (FDI) on China’s sustainable development. In this paper, based on the new political economics theory and overflow effects, comparative research and statistical research methods are adopted that combine static and dynamic analysis. Empirical research methods are combined with normative research to analyse the spillover effects of FDI on China’s sustainable development, particularly under the new situation of global crisis and the accompanying difficulties, to determine how to promote China’s FDI and the development of China’s sustainable progress strategy. The study found that in 2018, FDI in China reached a value of 13.466 billion US $, and the year-on-year growth in FDI in recent years has been basically stable at approximately 4 %. Asia is the main source of FDI in China. In 2018, the amount of FDI in Asia reached $109.1938.7 billion, accounting for 83.33 % of the total investment. Hong Kong, with its unique advantages, accounted for 72.12 % of FDI in China. FDI inflows are mainly directed to primary industry and the service sector, and the growth rate of foreign investment in 2016 in these sectors was 68.52 and 170.77 %, respectively, compared with 2007. FDI also mainly flows to the eastern region of China. By the end of 2018, the amount of foreign capital utilized in the eastern region reached $1,622.9 billion, representing 85.4 % of the aggregate FDI in China. The effect of FDI on China mainly focuses on three areas: economic growth, social development and environmental protection. FDI has brought positive spillover effects to China’s sustainable evolution, but with China’s continuous development, especially the change in its economic development mode, it has been consistently exposed to negative spillover effects.