The Mechanism And Empirical Study On The Influence Of FDI On Liaoning Province Foreign Trade

With the steady development of economic globalization, FDI and international trade have become the two most important international economic activities, and the integration of trade and investment has become the mainstream. With China’s further integration into the world economy, FDI is bound to develop with a steady pace. The study on the influence of FDI on trade has more practical significance. How to manage the relationship between FDI and foreign trade will also be particularly necessary when regard Liaoning Province as a region. In the meantime, the research is conducive to both ensure the coordination between FDI policies and trade policies, and realize the new development of Liaoning old industry.Based on the theory of the relationship between investment and trade, this paper firstly analyzes the status quo of Liaoning Province FDI and foreign trade from 2000 to 2014 in terms of total quantity and proportion, and shows the final outcome in the form of charts. Then it studies on the mechanism of the influence of FDI on trade, trade creation effect and trade subsitution effect under the perspective of host country. Based on the status quo and characteristics of Liaoning Province FDI and foreign trade, it speculates the effect of FDI on Liaoning Province trade development. The paper verifies the influence of FDI on import and export volume of Liaoning Province by time series model, and uses panel model to analyze the influence of FDI on import and export trade in various industries in Liaoning Province. Finally, this paper comes up with recommendations on how to attract and use FDI to develop Liaoning Province foreign trade on the basis of specific situation.The result of empirical study shows as follow. (1) There is a long-term equilibrium relationship between FDI and the import and export trade of Liaoning Province. Besides, FDI can promote the development of export trade and replace import to some extent. (2) The FDI of second industry has the most significant influence on export trade. The influence of the third industry is smaller, and the influence of the first industry is minimal. The FDI of second industry and the first industry will hinder the development of import trade, but the FDI of third industry has good influence. (3) Investment of Western developed countries has postive influence on import and export trade of Liaoning Province, and the influence on export trade is greater than import. Canada and Australia’s investment will promote the development of Liaoning Province trade, and the influence on import is greater than export. Investment by emerging economies and developing countries will boost Liaoning Province export trade, and hinder the development of import trade. Therefore, this paper suggestes the coordination amoung FDI policies and trade policies to promote the trade development in Liaoning Province.