Study on the Driving Mechanism and Mathematical Model of Domestic and Foreign Capital Flows in Free Trade Zones on Regional Economic Development

The downward pressure on China’s economic growth under the new normal is increasing year by year. In the case that traditional drivers such as investment-driven, factor-driven and export-driven cannot drive the economic growth strongly, this paper constructs a mathematical model to explore the driving mechanism of internal and external capital flow in FTZs from the perspective of the regional economic development. The study applies the Sill entropy value and the intertemporal savings-investment model (F-H model) to measure the regional economic development gap and the internal and external capital flows in the FTZ. Afterwards, the sample data from 2014-2023 are selected to construct a multiple regression model to analyze the impact of internal and external capital flows in FTZs on regional economic development in the eastern, central and western regions. The eastern, central and western regions of China show the values of R² of 0.933, 0.915 and 0.963 after regression, indicating that the fit of the model is relatively high. The growth of the regional economy is influenced by the flow of internal and external capital between different regions in the FTZ, as shown by empirical results. It will flow to the eastern region with faster economic development, providing favorable conditions for the further development of the eastern region’s economy, but this will further increase the development gap between the eastern and western regions of the economy and make the regional economic growth unbalanced.