The Research On The Relation Between Chinese International Direct Investment And Trade

According to the " marginal industry " theory of Kojima, foreign direct investment has function promoted on trade. Foreign direct investment promotes trade like this: Foreign direct investment brings such plural operational resources as investment, technology, management ,etc. to the partner country, and expands the production capacity of labour-intensive products of the country, improving the production possibility contours of the country and consuming capacity at the same time , So, on one hand, because the production cost of labour-intensive products of the target country is lower, therefore, export of the target country is expanded ,import of the home country expanding . On the other hand, because of the enlargement of the consuming capacity of the target country, the demand for the capital-intensive products becomes great, too, therefore import of capital-intensive products of the target country expands, export of the home country become great.In fact, China has dual identities: the absorption country of FDI and the home-investig country. And purpose of the Chinese direct investment to a developed country and the purpose of the Chinese direct investment to the developing country is totally different. Therefore, while analysing in this text, we divide foreign businessman's direct investment to China into (?)e direct investment of the developed country and the direct investment of the deve(?)ng country, and divide China's foreign direct investment into: the Chinese direct in(?) stment to developed country and the Chinese direct investment to developing country. On this basis, we get four regression models. Considering there are more variables in the equations, It will product multicollinearity, so we utilized a new method which is ridge regression. Utilizing the data every year, we get the result: FDI really promote the Chinese trade, but the Chinese direct investment to developed has no relation with trade, and the Chinese direct investment to the developing country can promote trade to a certain extent. Through studying, we find theoretical foundation of FDI promoting trade is the "marginal industry" theory of Kojima, and the main purpose of the Chinese direct investment to the developed country is to study the technology and experience of management of the developed country, it is a strategic objective of the Chinese company, too. Therefore, there is no relation between the two variables. So, we utilize "related policy" to absorb FDI. When structuring the policy of promoting China's foreign direct investment, we must focus on the macroscopical environment --Economic globalization.