An Emprical Analysis: The Fusion Of Chinese Foreign Trade And The Foreign Direct Investment (FDI) From 1992 Through 2002.

The thesis is about an Emprical analysis: the Fusion of Chinese Foreign Trade and the Foreign Direct Investment (FDI) from 1992 through 2002. In general, the relationship between a country's foreign trade and its FDI utilization is subsitituted or is motivated mutually. Accordingly, In some cases, one country's foreign trade increases while its absorption foreign direct investment decreases. However, in other cases, one country's foreign trade and its absorption increase and decrease together.The period concernded witnesses that Chinese foreign trade and the absoption of FDI are two simultaneous remarkable growing momentums, representing an annual compounded growth rate of 10.60% and 10.04% respectiviely. These two values are higher than that of Chinese GDP, which increases by the 8.27% annual compounded growth rate. China's foreign trade and economic cooperation develop at leaps and bounds resulting in the successful realization of the first strategic objective toward modernization.In my thesis,I apply a 12-year time series to analysize the relationship between Chinese foreign trade and FDI by means of statistics and econometrics . In terms of the fusion of the Chinese foreign trade and FDI, there are main characteristics:1 .Both Chinese foreign trade and FDI contribute to the opening up and the total value of Chinese GDP .The Chinese trade dependency is 38.14% in 1992 and 49.63% in 2002,with the 5.3% annual compounded growth rate.Overwhelmingly, the foreign-dependent rate of FIES picks up steam, from 5.27% to 42.00% increasing by the 20.77% annual compounded growth rate. It is obvious that the proporation of China's trade and FDI to its corresponding GDP are significantly increasing from 1992 to 2002. Nevertheless, Chinese fananical asset internationalization speeds up farely more faster than merchandise internationalization.2.Foreign-invested enterprises (FIEs) expands the scale of Chinese foreign trade, and improves the structure, quality and standard of Chinese mechandise trade. Most FIES invest in Chinese export-oriented industries, and Chinese market advantages, labor advantages and complete manufacturing system advantages appeal strongly to foreign investors. As a result, both Export and import of FIES pursue proportions over 40% in the national exports and imports, increasing by 24.73% and 19.68% respectively,. In the industry, the trade dependency of FIES amounts to 41.67%, surpassing 19.05% of the average level of the wholly industrial enterprises . Therefore, on the one hand , FIEs promote the pluralization of Chinese foreign trade parters, diverges the risk in foreign trade activities, and solidified the position of China in the world market. On the other hand, FIES import advancded technology and key equipment from foreign countries, which plays an significant role in enchancing the technological advantage and competitive advantage of China's export products.Meanwhile, when the quality of foreign direct investment in China has improved conspicuously, foreign-invested enterprises optimize the export structure of the national export. From 1992 to 2002, the proportion of FIEs's manufactured goods export to their total export is 88.30%, four percentage points higher over the national corresponding export. In addition, FIES are the main entities of the key and bulk new- and high-tech product export, accounting for over 80% of the wholly national corresponding export.3.Foreign-invested enterprises solidify the comparative adavantage and the competive advantage of Chinese export goods. According to the practical andempirical study, the comparative adavantageous and competive advantageous goods consist of the same merchandise, which are resource-intensive goods, labor-intensive goods or low value-added goods. In particular, FIEs enchance the quality of clothing, footwear, headgear, umbrellas, travel articles, handbags and other relative unsophisticated products, resulting in a perceptible increase of the value of single investment in the previous years of the period concerned.However, FIES are decreasing in the value of single investment in textile sector, garments products sector and leather, furs sector. In recent years, the scale of Foreign-invested enterprises's average assets of the above amentioned trational sectors is lower domestic. In fact, after 1995, FIEs's positve effects in enchancing Chinese light industrial export products' international competive capacity are weakening.4. FIEs improve Chinese export products' comparative disadvantage and competive disadvantage. In this period, China's capital intensive products, tenchnology intensive products or high-added value products are grossly disadvantageous ,such as machinery, electric equipment, locomotives, vehicles, aircraft, ship, chemicals products, base metals and related products. Correspondingly, Chinese energy source industry, infrastructure and high- and new-tech industry lap the developed countried. lacking in internaitional competiveness, which are China's pillar indutries.Nevertheless, these disadvantageous products undergo much improvement in that Chinese government have encouraged foreign investors to invest in these pillar industries. According to comparative statistics ,among the pillar industries, FIES rnanily invest in electronic and telecommunication equipment, transport equipment, instruments ,meters, cultural and office machinery, special purpose equipment, metal products ,chemical fiber, raw chemical material and chemical products. Because FIES, especially Multinational Companies( MNCS), apply more advanded technologies to Chinese key important industries, these sectors' labor productivity is higher than the dometic corresponding enterprises. Forexample, FIEs sales proporation of electronic and telecommunication equipment sector are increasing, accounting for 74.0% of the wholly corresponding sales in 2002. As result, Chinese mechanical and electronic products, especially key and bulk new- and high-tech products maintain a steady increase and quality improvement.5.The econometric analysis reveals that only is the second industry absorption FDI is significantly related to the national imports.,with a positive coefficience of correlation. In addition , the econometric analysis finds that the coefficient of correlation between FIES foreign trade and Chinese foreign trade is significant and positive. In other words, higher the utilization of the second industry FDI and FIES foreign trade tend to lead to higher level of wholly imports and the wholly foreign trade respectively. Vice versa, the increament value of wholly imports and the wholly foreign trade tend to bring about higher level of the FDI absorption in the second industry and FIES foreign trade respectively. There is the relationship of the causes and effects between FDI involved and China's foreign trade.It is not surprising that both the primary industry absorption FDI and the teriary industry absorption FDI are insignificantly related to Chinese imports and exports in the period involved. From 1992 through 2002, the total values of the primary industry utilization FDI and the teriary industry utilization FDI accounts for less than 40% of the wholly absorption FDI.6.In conclusion , the fusion of the FDI utilization and Chinese trade is limited from 1992 to 2002. The more China encourage foreign investors to invest, and the more foreign investors ( MNCS) transfer advanced technologies , the more Foreign Direct Investment or Foreign-invested enterprises make whileworth contribution to Chinese foreign trade, enchaning exports comparative advantages and competitive capacity.7.The economic globalization brings about the significant adjustment of global economic structure and international division of labor. Faced with thefierce international competition, it is necessary for China to maintain and enchance its international competitveness in foreign trade and econmomic cooperation.In the future, China will face several favorable factors for the fusion of its foreign trade and absorption of FDI .First, with stable political situation and sustainal economic development, China has entered an important period with strategic opportunities for building a well-off society in an all-round way. Second, China's accession to WTO will further show its positive effects. Third, the structure adjustment of global industries is a favorable opportunity to China. So, it is important and crucial that China should continue the strategies of "Winning with Quality", "Market Diversification", "Revitalizing Trade through Science and Technology" and "Going Global" in the field of foreign trade and economic cooperation.As for the fusion of Chinese foreign trade and the FDI obsorption, China should continue to expand the export management right of FIES to establish export procurement centers and further perfect and carry out the export rebates policy to FIES; the processing trade should be encouraged and problems in downstream processing carrying-forward in the processing trade should be solved; the medium- and small-sized enterprises should be guided to strengthen their cooperation with foreign companies and provide supporting service for the large FIEs; the sales network of foreign investors should take full advantage of to promote the export of domestic products.In particular, in compliance with the need of national economic structure adjustment and the tend of increasing extension of opening-up fields, the government should encourage the foreign investors to invest in traditional agriculture to promote the development of modernized agriculture;foreign investors should be encouraged and properly directed to modern logistcs and chain opertion; problemes that hinder the development of modern service industry, such as local protectionsim should be settled; opening up of such...