International Direct Investment And The Development Of Trade In Chinese Products,

International intra-product specialization has been a main division pattern as the global expansion of multinational corporations. As a result, inter-product trade plays a important role in international trade, especially for most developing countries.There are two point of views for the reason of intra-product specialization. One is based on traditional trade theory, which introduces FDI theory and transfers the research object from product to manufacturing procedure. The other is to analyze the relationship between corporation behavior and intra-product specialization, grounded on production and management of multinational corporations. The two different theories are complementary since they focus on macro and micro angle respectively. Despite the different theories, international investment is the basic reason for international intra-product specialization.Comparative advantage is the foundation of intra-product specialization according to traditional trade theory, and intra-firm trade is the main carrier of intra-product trade because of the concern of trade costs. On the other hand, multinational corporations put different production procedures in corresponding countries for cost cutting and profit maximization, as the factor intensity of each procedures is distinct and the comparative advantage of different countries is diverse.As a important role in world economies, China has gradually participated in the international intra-product specialization system through processing trade pattern, which brings big influence to the economy including expansion of trade volume and social employment, upgrade of industrial structure, and accumulation of trade surplus. Intra-product trade, or processing trade is developed by international investment, and it can be proved by demonstration analysis according to China's historical FDI data and intra-product specialization index.