Abstract: Since the reform and opening,China has gained great progress in utilizing foreign capital which has been playing important role in China’s economic development In the 90’s,with the huge increase of foreign capital,some negative effects resulted from inappropriate foreign capital scale and structure are broadened and seriously influence China’s economic construction It seems extremely important to bring foreign capital into full play through deep research into foreign capital demand.

Key words: foreign capital, demand cointegration model, error-correction model