Empirical Analysis Of Trade Effects On China's Direct Investment In Latin America

Judging from China's implementation of the "going out" strategy, our foreign direct investment scale expanded rapidly. China's direct investment to the Latin American countries in 2006 accounted for 48% of the China's foreign direct investment; Latin America has replaced Asia (43.4 percent) as China's largest overseas investment destination. In large number of Chinese and foreign literature, we found that the complementary role of foreign direct investment in the home country trades are bigger than replaceable role. Therefore, our direct investment to Latin America and the trade relations between each other, the significance of foreign direct investment in the development of China's trade and the entire national economy, have caused the scholars widespread concern.At the first, this paper will introduce the theory and empirical research results of FDI effects on country trade, including investment and trade replaceable theory, the product life cycle theory and so on; Then analysis the trade effects of China's foreign investment, especially in Latin America, discuss the main reasons and influencing factors of trade complementary and replaceable role. In Empirical Analysis, we choose the gravitational model and ten Latin American countries whose trade and investment with China are close, and use method of panel data regression. As to the result, the effects of FDI in Latin America on China's exports and imports are both created. Finally, we analysis the causes for the creation effects, and put forward policy recommendations against this situation.