A Research Into China's Outward Direct Investment Development Path And Its Trade Effect

Globalization has already become the world's main trend of economic development. The international direct investment by the multinational corporations as its representative has become the important strength impelling the scale and scope of the circulation and disposition of elements of production to expand unceasingly internationally. After more than 20 years of its implementations of the reform and opening up policy, China has now been connecting and merging the world with its bidirectional thoughts of "introducing in" and "going out". Direct investments both inward and outward are our main tasks in China's new era of economic development. It is well known that as a great nation of international trade, China has been playing an important role in the world's economy with a marvelous imports and exports volume as the essential engine contributing to China's sustainable development. However, our foreign trade is now confronted with the difficulty of maintaining its soaring speed of development. Facing us is the deterioration of the world's trade status and our fundamental weakness of trade structure. How to transform China's mode of foreign trade growth is an urgent question for us to resolve.This essay has made reference from contemporary direct investment theories both home and abroad, combining China's existing development conditions and the typical characteristics of outward direct investment to make empirical studies of testing which specific stage China is on with the theory of investment development path (IDP) as the basic analytical frame. The essay emphasizes the exploration into the relative relation between the present stage our outward directinvestment is on and its trade effect. We eventually come to the conclusion that China's outward direct investment has trade creating rather than trade replacing effect, that is to say, our outward direct investment has positively enhanced and promoted our foreign trade. Therefore, developing our direct investment and fostering China's multinational corporations will probably become the new engine boosting our foreign trade and the important solution to the development bottleneck of our foreign trade.This essay takes the applied research primarily. On the basis of macroscopic analysis, it provides a theoretical evidence for developing China's outward direct investment and encouraging Chinese enterprises "going out" to grow stronger and more competitive. It also offers some development strategies and practical suggestions for our government to encourage and support outward direct investment. Our ultimate and solitary goal is just to accelerate the transformation of our trade mode and lead to a sustainable development of China's foreign trade.