Research On The Mechanism Of Foreign Direct Investment On The Host’s Foreign Trade Structure And Optimizing Countermeasures

This article firstly conducted a qualitative analysis on the elements influencing foreign trade structure from a perspective of comparative advantage and the analysis showed that the factor endowments, production technology, human capital and institutional factors had a major impact on host country’s foreign trade structure transformation. Furtherly, the mechanism of impact of FDI on optimization of foreign trade structure was studied. This article thinks that FDI inflows could lead to four effects as capital accumulation effect, technological progress effect, human capital enhancement effect and institutional change effect, Thus lead to the host-country’s transformation on comparative advantage and trade structure optimization. Capital accumulation effect by FDI inflowment offer capital assurement for the host country’s industrial structure optimization and also allows the host to undertake industrial structure incremental improvement and stock adjustment, then promote the upgrading of industrial structure and comparative advantage change. Technical progress effect by FDI inflowment could improve the productivity of existing elements and promote new products or new breed to come out, then influence national factor endowment ratios and trade comparative advantage. Human capital enhancement effect by FDI inflowment could stimulate the optimization of human capital structure of the host which could affect the host’s dominant industry, it also could promote the host to adopt new technology or implementation, these will manifests industrial structure transformation and trade structure optimization of the host at last. Institutional change effect by FDI inflowment are mainly embodied in promoting financial market and improving contract enforcement environment, which will promote the formation of comparative advantage of the host’s industry and international trade.Further detailed analysis and empirical investigation about the foreign direct investment (hereinafter referred to as FDI) and foreign trade structure showed that, FDI mainly concentrated in China’s labor-intensive industries and China still has a large space for the use of FDI, China’s export structure has gradually transited from labor-intensive to capital-intensive and technology-intensive and could maintain the continuous upgrade of export structure, Mechanical and electrical products and hi-tech products have gradually become China’s major import commodities and replacement production capacity of capital goods has gradually increased, China’s export target region is highly concentrated and the external regional structure is highly unbalanced, Feed processing export proportion increased every year and export industries including high-tech exports highly depended on foreign technology and R&D capability, Foreign-invested enterprises has the growing trend of leading foreign trade structure.For an in-depth investigation of the relationship between China’s FDI inflows and foreign trade structure changes, further in this paper regional panel data of 30 provinces of mainland China (Chongqing incorporated into Sichuan) during 1985-2009 years were used as samples and Method of Difference GMM and System GMM was respectively made to empirically test the impact of China’s export trade structure. The test results showed that along with the inflow of FDI, China’s export trade structure has been optimized, but there existed complicated relationship among FDI, exports and domestic output, If further policy measures were carried out to adjust the scale and direction of FDI inflows, the impact of FDI on foreign trade structure would be more pronounced.On the basis of above analysis, for effective utilization of FDI to promote the optimization and upgrading of the foreign trade structure, government should formulate more rational policy the introduction and utilization of FDI, in order to more efficiently promote technological progress, human capital promotion and improvement of institutional environment, meanwhile, government should also promote the coordinated development of foreign investment and foreign trade policy.