Study On Intermediate Goods Trading By Multinational Corporations FDI

Along with the in-depth development of economic globalization, more and more countries are integrated into the world economy. Trade in intermediates as an international economic phenomenon is a natural result of economic globalization and international division of labor ever since its emergence. As the main agent trading in intermediate goods, multinational corporations play a very important role in intermediate goods trading. In these recent twenty years, trade in intermediate goods developed rapidly, and the import and export of intermediate goods constitute an important part of China's total international trading. China's trade in intermediate goods has three salient characteristics. First, it is influenced profoundly by foreign direct investment. Second, the scale and volume of intermediate goods import is large, which is especially reflected in the low local procurement rate in the processing trade. Third, the import and export of intermediate goods is closely related to China's participating in economic globalization and its dynamic comparative advantage. In multinational corporations' international production process, what characteristics will intermediate goods trading have? Within a certain multinational corporation, with the different branch companies in different countries operating relatively independently in the vertical specification production process, why and how does trade in intermediate goods work in these interrelated multinational corporations' production processes? What implications will trade in intermediates generate for China's foreign trade and even economic development? Therefore, it presents before us a completely new topic in international trade research to investigate the trade of intermediate goods from the perspective of multinational corporations.This paper includes seven chapters. Chapter 1 mainly describes the content of multinational corporations' trade in intermediate goods; the second chapter is literature review about FDI's trade in intermediate goods from the three perspectives of international trade, international foreign investment and the integration of investment and trade. The third chapter illustrates the relationship between multinational corporation's foreign direct investment and trade of intermediate goods; the fourth chapter explores the factors affecting FDI's trade in intermediate goods from the three aspects of comparative advantage, transaction cost and the effective protection rate of tariff; the fifth chapter analyses the effect and efficiency of FDI's trade in intermediate goods; the sixth chapter discusses the practical application of FDI's trade in intermediate goods in China; finally, the article concludes with some conclusions and suggestions for further research.The research we made in this paper has some important theoretical and practical implications: first, centering on trade in intermediate goods from the perspective of multinational corporations, we used the related theories in international trade, international investment, industrial economics and management to testify and modify the controversial issues when applying the traditional international trade theory to intermediate goods trading; theoretically, introducing the conditions of imperfect competition and corporate hierarchical management, we made in-depth analysis of the relationship between multinational corporations' FDI and trade in intermediate goods, and made improvements in the theories of intermediate goods trading in the context of economic globalization. Second, using qualitative and quantitative analyses, by specifying related mathematical models, we illustrated the conditions and requirements that multinational corporations demand when they choose intermediate goods suppliers; we explored the reasons behind the comparative advantage of intermediate goods trading, compared the differences of intermediate goods trading between the two cases of having or not having transaction cost, and we also discussed the extent to which tariff policies affect intermediate goods trading. Third, we empirically tested to what extent China has participated in international division of labor and the extent and depth to which China's international trade is affected by multinational corporations' FDI. Research on the above issues from the perspective of multinational corporations remains yet absent in China up to the moment.The major contributions of this article are as follows: (1) From the perspective of multinational corporations, by analyzing the factors affecting multinational corporations FDI's trade in intermediate goods and their effect and efficiency, we discussed trade in intermediate goods by multinational corporations FDI. This is the contribution we made as far as research perspective is concerned; (2) Based on the traditional theory of international trade, we analyzed the innovative theory and practice of intermediate goods trading by multinational corporations FDI, and this is the contribution we made as far as the research content is concerned; (3) When analyzing the mechanisms by which various factors influence the trade in intermediate goods, we make efforts to use models, and at the same time, we empirically test the correlationships between multinational corporations and China's trade in intermediate goods. We attempt to make some contributions in the methods we use.