Study On The Influence Of Taiwanese Direct Investment On The Trade Between The Mainland And Taiwan

The relationship between FDI and foreign trade has become a hot issue in the field of Open Economics. A lot of literature has been focused on the influence of the FDI on the international trade. This thesis tries to discuss this kind of relationship based on Taiwanese Direct Investment on the Mainland China and the trade of the two economies of the Strait. What's more, this thesis tries to further to discern what kind of influence does the FDI exert on the international trade, especially to the merchandise structure;which factors make the influence and how to make? We try to study the influence of FDI on the international trade in a specific and simplified situation.Taiwanese Direct Investment on the Mainland China and international trade are the two main parts of the economic activities of the Taiwan China and Mainland China. The results of the correlativity analysis show that there is a close complementary relation between TDI and trade between the two economies. When TDI added 1 dollar, there will be more goods worthy 3.793 dollars in the trade including goods worthy 0.627 dollars exported to Taiwan and goods worthy 3.166 dollars imported from Taiwan. There will be 2.539 dollars trade deficit when there is 1 dollar in the TDI on the Mainland. In this sense, the TDI benefits the two parts, especially to the Taiwan. Yet the imbalance of the trade will lag the development of the trade of the two parts and barricade the merge of the two economies.TDI on the Mainland has influenced the merchandise structure of the trade between the two parts. In 1980's, TDI focused on the labor-intensive industries. In 1990's, TDI focused on the capital-intensive industries and in recent years, TDI gradually transferred into technology-intensive industries, especially in mechanical and electrical industries. Accordingly, the merchandise of the trade changed from labor-intensive goods in 1980's to capital-intensive goods in 1990's to technology-intensive goods at the dawn of this century.The close complementary relation of TDI and trade is based on the difference ofthe produce factors of the two parts and the upgrades of the industries of Taiwan. TDI can use the factors efficiently and the trade makes it possible to utilize the comparative advantages of the two parts. The different policies on the economic activity of the two authorities are another important factor. The Taiwan Authority always barricades the TDI and the trade for the reason of politics. It makes hard for the Taiwanese to invest in the mainland and causes the trade deficit of the Mainland.TDI on the Mainland and the trade between the two economies is the result of the market choice and the policies of the two authorities. Distribute the resource through the market, not by the government is the main principle of the economical activities between the two parts. First we should open the three transfers between the Strait. Second, we should coordinate the policies of the FDI and foreign trade. The last but not least, we should improve the soft environment of the TDI.If we can set up Greater Chinese Free Trade Zone which include Mainland, Hong Kong, Macao and Taiwan under the framework of One China Policy, we could utilize the comparative advantage of the four parts to have a better investment and Trade environment. The GCFTZ is a optimistic prospect, but we believe that in the coming years, it will be an agenda of the two parts between the Strait as the development of the economy and the relax of the two authority...