The spillover effect of foreign direct investments on the Chinese economy

Abstract: In 1980, China set up four special economic zones (SEZ) to attract overseas investors to gain advanced technology and economic growth. Until now China has become the largest recipient of FDI these years. This gives the author great interest to study the spillover effect of FDI in China. The research question is from 1997 to 2016, whether FDI had an impact on China's economic growth, and whether it had advantages or disadvantages. To better understand the decisions made by Chinese managers, a new sub-research question stands out: whether the special economic zones set by China have a positive impact on the economy. This thesis uses panel data to help answer research questions. The Data includes 31 provinces in China from 1997 to 2016, except GDP (t-1), which is from 1996 to 2015. The result shows the data in this paper are not enough to support the positive relationship between special economic zones and economic development and fail to provide readers with an early understanding on the establishment of special economic zones by Chinese leaders. However, there is sufficient evidence to show whether the spillover effect of FDI has an impact on China's economy.