The Crowding-in and Crowding-out Effects of Foreign Direct Investment on Domestic Investment in the Yangtze Delta Region

In recent years, the economic development of China's Yangtze River Delta, especially foreign direct investment in the area, has attracted the attention of academics in China and abroad. It strongly promotes the economic development of this region. This paper studies the correlation between foreign direct investment and the Yangtze River Delta's economic growth from a quantitative point of view. Through regression analysis, a strong correlation is found between foreign direct investment and the economic development of the Yangtze River Delta region. The Cobb-Douglas production function and Thoro-Swan growth model are used with selected panel data from the period 2000 to 2008, yielding quantitative measurement and analysis of the contributions of labour and capital investment to the economic growth of the Yangtze River Delta area. It is concluded that foreign direct investment in the region creates jobs and increases the efficiency of labour resources. Furthermore, empirical analysis of foreign direct investment supports the crowding-in and crowding-out effects of regional internal investment, and it is concluded that foreign direct investment has a crowding-in effect on regional economic development; that is, each unit of foreign direct investment brings 2.4241 units of domestic investment.