The Impact Of FDI On The Growth Of China's Foreign Trade

Economic globalization has been a growing trend of global economic development since the World War Two. In recent years, the economic globalization is reflected by the rapid development of international trade especially in form of the foreign direct investment (FDI). Countries have reaped the apparent economic benefits from the increasing international trade through FDI, which greatly have boosted their economies.In the past decade, the export performance of the Chinese economy has been phenomenal. Although China has been opening up its economy for more than twenty years, it is generally considered that its accession to WTO will imply far-reaching consequences for its economy. The rapid expansion of its international trade and large capital inflows provide evidence of the increasing integration of China in the world economy. Since 1980, China's share in international trade has trebled, rising from less than 1% to more than 3% in 1999. China has become the second largest recipient of foreign direct investment (FDI), with cumulated inflows amounting to more than US$ 560 billion at the end of 2004. These two trends appear to be closely interrelated.China's opening up policy has aimed at promoting exports, while protecting the domestic market. This was achieved through a dualistic trade regime which has granted tariff exemptions on imports of intermediate by export-oriented industries, and through a selective policy which has channeled FDI into manufacturing production targeted for exports or for import substitution. As a result, FDI has played a major part in the opening up of China's industry and in its integration into the international division of labor.