The Impact Of Eu's Fdi In China On Sino-Eu Trade Imbalance

China is the world's largest developing country while the EU is the largest group of developed countries. And with the fast development of their bilateral trade and investment relationship, these two parties are both playing important roles in world trade and FDI activities. However, since 1997 the first surplus has emerged in Sino-EU trade, the trade surplus has been expanding each year and has become a focus of attention. Meanwhile the scale of EU's FDI in China has expanded continuously. This paper mainly focuses on studying the influences to Sino-EU trade imbalance caused by EU's FDI in China; I adopt theoretical, experiential, empirical and analytical methods to analyze the impact mechanism, and finally put forwards some practical suggestions.In this paper, I select the data of EU's FDI in China and Sino-EU trade imbalance statistics during the years between 1985 and 2008 as research objects, and first I analyze how the various factors of EU's FDI in China affect Sino-EU trade imbalance. In the empirical part, at first I briefly introduce the status and major characteristics of EU's FDI in China and Sino-EU trade imbalance. Then by using co-integration analysis this paper concludes that EU's FDI in China and Sino-EU trade imbalance have a long-term equilibrium relationship and that the increase of EU's FDI has helped to expand Sino-EU trade imbalance. Meanwhile, in order to deeply analyze the effects in different sectors, this paper also studies three different industries, primary product industry, labor intensive industry and technology or capital intensive industry. The study has found that inward FDI from the EU contributes more to trade imbalance in technology intensive industry than the other two, which is consistent with the preceding analysis.Finally, this paper concludes that EU's FDI in China and Sino-EU trade imbalance has a long-term equilibrium relationship and the increase of EU's FDI has contributed greatly to the Sino-EU trade imbalance. Besides, inward FDI from EU contributes more to the trade imbalance in technology intensive industry than to primary product industry and labor intensive industry.