The Impact Of China’s Outward Foreign Direct Investment On The Technical Structure Of Export Products

As the financial crisis broke out in 2008,leading to the spread of the global economic crisis,China is facing the challenge of insufficient external demand and the warming of trade protectionism.Although the global economy has recovered in recent years,it is still facing challenges.In 2016,China’s total import and export volume was $3.7 trillion,decreased by 6.8%from 2015,and the total export volume was $2.1 trillion,decreased by 7.7%from the previous year.The trade surplus was $0.51 trillion,narrowing by 13.9%compared with the previous year.It suggests that China’s external demand environment is not optimistic.China is an export-oriented country.Under the background of the global economic weakness,it is particularly important how to improve the technical complexity of China’s exports,and then optimize the technical structure of exports.Processing trade has a great impact on the technical structure of a country’s exports,especially in a country like China,which has a high proportion of processing trade.In 2016,China’s processing trade accounted for 34%of its exports,down 1.1%year on year.Although there was a small decline,it still accounts for one third of China’s exports.China’s processing trade mainly depends on the import of high-tech intermediate products(raw materials and spare parts,etc.),it will be exported to another country after simple processing or assembly.Superficially,the technical sophistication of China’s exports is higher,but this is not consistent with China’s economic development level.The technical structure of a country’s exports should consist of two parts:one is the technical content contained in the intermediate products imported from other countries,the other is the technical content increased at home,and the latter should actually represent the technical structure of a country’s exports.Therefore,the technical content of imported intermediate products in the form of processing trade should be eliminated when measuring the real technical structure of exports.Under the background of the export situation is not optimistic,China’s outward foreign direct investment has increased rapidly.According to statistics,in 2016,China’s outward foreign direct investment flows reached a record of 196.15 billion US dollars,increased by 34.7%,and ranking second in the world.The same year’s stock of outward foreign direct investment reached 1357.39 billion US dollars,accounting for 5.2%of the world,leaping to the sixth place in the world ranking.With the increasing scale of outward foreign direct investment in China,it is very significant to develop the domestic economic whether can promote the optimization and upgrading of China’s technical structure of exports.This article is divided into seven parts for research.The first part is the introduction,which explains the background and significance of the topic,leads to the research direction of this article,and combing the relevant literature to choose the method that can accurately measure the technical structure of exports,explains the research method and the structure framework of this article,eliminates the technical content of intermediate products is the main innovation of this article.The lack of data in individual years may affect the accuracy of the empirical results;the second part is the theoretical basis.This article combines the relevant theories of trade and OFDI,and deduces the relationship between OFDI and the technical structure of exports by Melitz model;the third part analyzes the technical structure of China’s exports.By revising Hausmann’s traditional measurement method,the technical content of the intermediate products is eliminated,and the technical sophistication of China’s real exports in 2003-2016 is measured.The results show that the technical sophistication of China’s exports is on the rise in general,and carrys out multidimentional analysis;The fourth part analyzes the current situation of China’s outward foreign direct investment,and then analyzes the development process,current situation characteristics,correlation analysis with export structure and the current problems faced;The fifth part is the mechanism analysis,analyzes the transmission mechanism of OFDI on technical structure of exports from direct and indirect effects;The sixth part is the empirical analysis.Based on the panel data of China’s provinces from 2003 to 2016,FE and FGLS models are used for regression analysis.The results show that China’s OFDI will optimize the technical structure of exports,and then carry out subsample regression.The results show that China’s OFDI has the strongest effect in the eastern region,the central region is weaker,and the western region is the weakest;the seventh part contens the research conclusion and policy suggestion.It draws the conclusion that the China’s technical structure of exports is constantly optimized,the distribution of OFDI is unbalanced and the effect is different in each region.Then we suggest that strengthen OFDI,accumulate R&D and human capital,narrow the regional differences,establish and perfect the framework for protecting OFDI and improve the position of the international value chain.