Empirical Analysis Of Foreign Direct Investment In China Trade Effects

Since the reform and opening up,China's foreign trade has been developed rapidly.Trade surplus substitutes the trade deficit in the very beginning and maintains a certain growth rate every year.However,at the same time we should see that with the rapid development of foreign trade,foreign direct investment also increases gradually. With the growth of foreign direct investment,foreign-invested enterprises play a more and more important role in China's foreign trade.The data show that China's trade surplus mainly came from foreign-invested enterprises.With the development of economic globalization,the relationship between international investment and international trade becomes closer.FDI is gradually becoming the main driving force of the growth of foreign trade.In that case,whether the relationship between FDI and foreign trade in China is alternative or complementary? What impact does FDI have on China's foreign trade? This has an important practical significance on China's attracting further foreign investment,and also is the main topic of this paper.This paper mainly includes three parts.The first part includes Chapter 1 and 2. Chapter 1 introduces the basic situation of China's foreign trade and FDI since 1980, and raises the question;Chapter 2 reviews the literature and empirical studies on the trade effects of FDI since 1960s,and finds two aspects that still lack research.The second part is the main part of this paper,that is,the empirical analysis part,which includes Chapter 3,4 and 5,respectively studies the creation and substitution effects of FDI on China's foreign trade,the change of trade effect after China's accession to WTO,and the creation and substitution effects of industrial products.The third part is the conclusion and policy recommendations,combining the analysis of the second part to raise several policy recommendations.Through the empirical analysis based on the data of China's FDI and foreign trade from 1980 to 2006,this paper generates the result that at present,the creation effect of FDI on China's foreign trade is more prominent,while the substitution effect does show clearly.In the long run,to maintain the high and steady growth of foreign-invested enterprises,China needs to improve the quality of their exports, which is,to increases the exports of technology and capital-intensive products,and puts more effective management on their imports.