The Study Of Impact Of International Direct Investment On The Global Economic Imbalances

With the acceleration of economic globalization, the trade deficit of U.S.-based Developed countries or regions and surplus of China-based East Asian countries keep increasing. The so-called "Global imbalance" problem has formed and led to extensive discussions of the "rebalancing the world economy". The performance of global imbalance is continued deficit in current account of the developed countries represented by the United States. Furthermore the deficit scale has expanded each year, compared with the current account surplus of Asia emerging markets and developing countries represented by China. The Sino-US trade imbalance is dominant in the global imbalance. The global imbalance is not only related to the domestic economy of the world’s two largest economies, China and the United States, but also affecting the other countries in the world and the whole world economy."World Economic Outlook" in2011points out that the uncertainty of world economic recovery is increasing, and global economic activity is weakening, therefore the study of global imbalance is increasingly important.Indeed, in the context of economic globalization, the international allocation of production factors has led to the transfer between the industrial countries, leading to domestic and global economic restructuring which reflects in BOP that the original state of equilibrium is broken:some countries’balance of payments situation has improved, while the other countries’balance of payments has deteriorated, which is what people call the "imbalance". In this process, the FDI has become an important thrust of the global imbalance. Then in the "rebalancing the global economy" ideology, in the controversy of who shall bear the national obligations of further adjustment, how should people consider the international direct investment? For China, should it also adhere to the "going out" strategy? What is the impact of FDI on a country’s economy and its economic imbalances? What is the mechanism of impact? How should we adjust the investment strategy of the past? It is of great significance to the sustained and stable development of China’s economy as well as world economy. Based on these considerations, this paper selected the impact of international direct investment on global imbalances as the subject.This article based on the relevant theory of International Trade and Foreign Direct Investment will adopt the method of qualitative analysis and quantitative analysis combining theory with practice. At first, analyze the global imbalance and major performance and basic characteristics of the history and current situation of global imbalance; secondly, discuss the impact of international direct investment on bilateral economic structure and balance of payments of the investing country (host country) through method of qualitative analysis from two aspects of investing and host countries. Through the analysis of the relations between FDI and the Sino-US trade imbalance, further illustrate the relationship between FDI and economic imbalances. Finally, make the conclusions, development vision, as well as the suggestions of the reasonable adjustments in imbalance from the perspective of FDI.The structure of this paper is organized as follows:Chapter Ⅰ:At first, propose the significance of analysis of the impact of FDI on global imbalance; Secondly, according to different analysis of the research focus study the research status at home and abroad; Finally, illustrate the research method, structure, innovation and weaknesses. Chapter Ⅱ:the synthesis of relevant theory, mainly related to product life cycle theory, theory of vertical integration, trade alternative theory and trade complementary theory, which are the theoretical basis for the article. Chapter III: Analyze the history and present situation of global imbalances starting with several large global imbalances in history; secondly, according to the auxiliary data, discuss the performance and the main characteristics of global imbalance in the current stage, focusing on analysis of the characteristics of the profiles of the U.S. current account and the total Sino-US trade imbalance. Chapter Ⅳ:analyze and discuss the formation mechanism of the present global imbalances; from perspectives of investment and host countries, discuss the influence of international direct investment on the economic development of the investing country (host country), and thus to understand the impact of FDI on global imbalance. Chapter Ⅴ:Take FDI factor in Sino-US trade imbalance for example in, and take a look at the impact of international direct investment on global economic imbalances. Make an overview of the main characteristics of FDI in China; then adopting the co-integration analysis and error correction model, make a positive analysis of the effects of FDI on Sino-US trade imbalance to test whether there is a long-term equilibrium relationship between FDI in China and Sino-US trade imbalance. Chapter VI: summarize the conclusion and predict the future. Then from the view of appropriate intervention in the international direct investment, try to put forward the policy options in favor of rebalancing the global economy.The basic conclusions of this paper is:in the context of economic globalization, the international allocation of production factors leads to the transfer of industries in the countries, bringing the change of existing trade patterns, and FDI is an important driving force for this change. Changes of the pattern of trade and increasing FDI flows lead to profound changes in world economic situation and the internal structure which reflect on the imbalances of BOP. This imbalance is the inevitable result of economic globalization. As long as the international division continues to exist, this imbalance will continue to exist. It is the human disruption of the market in resource allocation mechanism to make the so-called "re-balance" mandatorily. Of course, the excessive imbalances in international economic relations will also have some negative impact on relevant nation economic and social development. Therefore, it is necessary to take appropriate measures to adjust the excessive imbalance.