Empirical Study Of FDI And Export Trade's Impact On Industrial Agglomeration In China

Since the reform and open policy, China's economy is developing very fast with the phenomenon that the disparity between regions is growing. However among this phenomenon Industry agglomeration is outstanding, which has become the focus of the nowadays research. When it comes to the factors affected the Industry agglomeration, either theory analysis or empirical testing has achieved great success both home and abroad, but not including from the aspect of the foreign direct investment (FDI) and export trade. The FDI and the import-export trade are usually regarded as the catalyst to the developing country's economic growth. In the 1980s China has successfully attracted a large number of foreign investments; simultaneously China's exports value has also grown rapidly. This paper tries to take FDI and exports as a point of entry into the cause of China's Industry agglomeration, on the basis of the facts that a myriad of FDI and large amount of exports have promoted China's economic development ever since the 1980's.Firstly, this article carries on the empirical observation on the relations among FDI, the export trade and industrial agglomeration. Through analyzing the relationship among three agglomeration phenomenon which are foreign investment agglomeration, exports agglomeration and industrial agglomeration in China's rapid developing eastern coastal areas ever since the reform and opening up policy, the conclusion could be reached that the difference of FDI leading to the difference of export trade value, which further causes the unbalanced development in regional industrial agglomeration.The econometric part of this paper carries out the small sample Granger Causality test using time series data FDI, export trade value and industrial Gini coefficient. The result shows that there is a bi-causality relationship between FDI and industrial agglomeration. Also, both the general trade and processing trade could granger cause industrial agglomeration; industrial agglomeration granger causes processing trade.The main policy implications of this paper are that making use of the relationship between FDI, export trade and industrial agglomeration to narrow the gap between different parts of China, to attract more foreign investment, as well as improve our country's trade structure.