Abstract: This paper intends to explore empirically, with the view in both macro and micro spheres, the effect of FDI on economic growth in China. Firstly, we analyse the history and characteristics of FDI in China and the main determinants of FDI.Second, based on the total production function, we find the significantly positive effect of FDI on growth over the period of 1985 to 2004. Some policy suggestions are given at the end of this paper on how to attract more FDI.