The Crowding-In and Crowding-Out Effects of FDI on Domestic Investment in the Yangtze Delta Region

In recent years, the economic development of China's Yangtze River Delta, especially the foreign direct investment, has attracted the attention of academics in China and abroad. Through regression analysis, a strong correlation is found between foreign direct investment and the development of the Yangtze River Delta Region. The Cobb-Douglas production function and Thoro-Swan growth model are used with selected panel data for the 2000 to 2008 period, yielding quantitative measurement and analysis of the contributions of labour and capital investment to the economic growth of the Yangtze River Delta Region. It is concluded that foreign direct investment in the region has created jobs and increased the efficiency of labour resources. Furthermore, empirical analysis supports the likelihood of crowding-in and crowding-out effects of regional internal investment. It is also concluded that foreign direct investment has had a crowding-in effect on regional economic development.