Exemplary Analysis on Relationship Between FDI and Capital Flight in China——Cointegration Analysis and Error Correction Model

The phenomenon of huge Capital Flight (CF) appeared while China introduced a large number of Foreign Direct Investments (FDI). Quantitative analysis on the correlative relation between CF and FDI was of important instructional meaning for the theory and policy study. The Cointegration Analysis and Error Correction Model were applied according to the data of FDI and CF from 1982 to 2003 in China, and the error correction model was set up via EG two-step method on the basis of Granger theorem. In allusion to the positive correlation of FDI and CF, some policy advice was put forward.