A Study Of The Trade Effects Of Chinese Direct Investment In South Asia

Since 2013,China has deepened its economic and trade relations with countries along the "Belt and Road".Among them,South Asia as an important region along the "Belt and Road",the overall level of economic and trade cooperation between the countries in the region and China is also improving.Overall,South Asia has a superior geographical location and better conditions for cooperation and development,and there is a greater potential for trade and development cooperation between China and South Asian countries.Among the six existing international economic corridors planned and implemented by China,two of them(Bangladesh-China-India-Myanmar Economic Corridor and China-Pakistan Economic Corridor)involve the South Asia region.At the same time,China’s economic cooperation with South Asia also has many problems,such as the generally low quality of labor,backward infrastructure,low productivity and political instability in South Asian countries.In such a context,it is of strong practical significance to conduct research related to China-South Asia economic and trade cooperation to promote bilateral economic and trade relations.First,the paper analyzes the current situation of China’s investment and trade with South Asian countries from 2003-2021.In terms of investment,we can analyze four main aspects: general direct investment scale,large investment,greenfield investment and M&A investment.The overall upward trend in the size of Chinese OFDI in South Asia and the increasing importance of Chinese OFDI in South Asia;large-scale direct investment is concentrated in energy,metals and transportation and has a high setback rate;greenfield investment and M&A investment show a rising and then declining trend.In terms of trade,the analysis can be seen mainly from the overall trade scale,the scale and structure of trade in intermediate and final goods.China’s trade with South Asian countries is on the rise and has been running a trade surplus;the main products of China’s trade in goods with South Asia are intermediate goods,and the scale of trade is generally on the rise;the import trade of intermediate goods is mainly based on primary products and semi-finished products,and the proportion of parts and components is very small;the export trade of intermediate goods is mainly based on semi-finished products;the scale of bilateral trade of final goods is on the rise,mainly based on the import of consumer goods and export of capital goods.Second,the trade effect of China’s direct investment in South Asia is empirically analyzed using the trade gravity model,and the results show that: China’s direct investment in South Asia has a trade complementary effect;in the import trade effect model,the coefficient of OFDI is positive but insignificant,then China’s direct investment in South Asia has an insignificant promotion effect on import trade;in the export trade effect model,the coefficient of OFDI is positive and significant In the export trade effect model,the coefficient of OFDI is positive and significant,then Chinese direct investment in South Asia has a significant promotion effect on export trade,and for every 1% increase in Chinese direct investment in South Asia,Chinese exports to the South Asian region increase by 0.28%.Finally,based on the problems that arise in investment and trade cooperation between China and South Asia and the empirical results,this paper puts forward relevant policy recommendations to promote investment and trade cooperation between China and South Asia.The main ones are: China should increase its direct investment in South Asian countries,while promoting the diversification of investment methods and facilitating trade exchanges between the two sides through direct investment;targeted investment should be made with the advantages of South Asian countries to promote the upgrading of industrial structure,so as to solve the problem of trade imbalance;enterprises should formulate scientific and reasonable country-specific investment strategies,and the government needs to help enterprises resolve the political risks faced by direct investment in South Asia,etc.