Trade Effects Of U.s. Direct Investment

As the development of economic globalization, International trade and the foreign direct investment (FDI) take on the trend of integration. Nowadays China is the largest developing country while American is the largest developed country. The economic and trade relationship between China and US is more and more closely. Since the beginning of the Reform and Opening-up, Sino-US FDI and trade have been experiencing a tremendous expansion. Sino-US trade and investment promote and complement each other. With the further development in the process of integration of international trade and investment, the trade effect of FDI from US to China has been affected.Integration in trade and investment as a background, this paper studies the trade effects of FDI from US to China. In the research of the theory, this paper use the U-value chain model to discuss how integration of international trade and investment impact the trade effect of FDI from US to China. The paper also analyses how the FDI from US to China promote bilateral trade and increase bilateral trade imbalance. In empirical study, the data is divided into two parts sector in 2002 and test them separately, then to compare the test results. The author finds that FDI from US to China and bilateral trade are complementary before 2002. After 2002, the trade effect has been weakened, which verifies the theoretical findings of the study. The comparison between the theoretical research and the empirical test results provides support to the main reasons of the change of trade effects on FDI from US to China.This paper holds that the FDI from US to China promotes bilateral trade overall. But the rapid development of trade and investment integration changes the trade effect of the US direct investment in China to some extent. With the influence of international financial crisis and other factors, US direct investment in China shows that the trade effects is uncertain. Above analysis combine with practical problems and further research will show that Sino-US trade imbalance is the result of many factors and US direct investment is one of the most important reasons. Of course, the direct investment of other countries and regions in China, US anti-dumping, intellectual property disputes, statistical error and other factors also impact the Sino-US trade imbalance.