FDI

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This indicates that FDI inflows in China not only stimulate the remarkable growth of bilateral trade between host country and home country, but also promote the growth of international trade between China and the rest of the world. Thus, policies of bilateral or multilateral free-trade and investment area should be encouraged, which will be also favourable to promote the growth and welfare in all the regions. In addition, the derived quantitative results imply that there are still greater potentials for further introducing FDI inflows in China, and decision-maker should make policy of introducing FDI inflows which are favourable to supporting innovative activities and economic agglomeration, and preferably encourage efficiency-seeking and export-oriented FDI inflows so as enhance quality and efficiency of economic growth, which are also helpful to accelerate upgrade of Chinese industry and gradually shorten gap of growth among eastern, middle and western region.

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