Financial Deepening, FDI And Export Trade

Since China joined into the WTO in 2001, our country accelerated the footsteps obviously to the world economy. After 14 years of rapid development, China’s economy had a rapid growth, China grew rapidly from the world’s ninth-largest economy into the world’s second largest economy, the largest exporter, and trading country. But with China’s economic scale growing, and the international trade environment changing, China’s financial system had to reform. In general, developed countries usually have a developed financial system, this paper tries to study the relationship of China’s economy and international trade, and to find out the action mechanism of our country foreign trade and deepening reform of the financial system.This article borrowed the ideas of the Rajan and Zingales(1998), based on the new-new international trade theory, and had an empirical test about financial deepening, FDI and export trade’s dual margin. Results showed that in the aspect of extended margin, the development of China’s financial system is conducive to the development of higher external financing dependence of enterprises to expand export market, improved the possibility of an enterprise entering the export market. In the aspect of intensive margin, the deepening development of China’s financial system can promote enterprises which external financing dependence is higher operating in the best condition.FDI also can substitute for bank credit, provided enterprises with the external finance, thus FDI played a positive role to ease the financing constraints of the enterprises and improve the export. At last, our government should introduce FDI reasonably into the middle-western regions, because FDI can narrow the development gap between the eastern region and the inner regions of China.