The Impact Of The Creation Of China-ASEAN Free Trade Area On China's FDI

With the trend of economic globalization, the pace of regional economic integration is accelerated. European Union (EU) and North American Free Trade Area (NAFTA) have proved to be successful examples, for both have enjoyed welfare increased through regional economic integration. 2002, China has signed documents with Association of Southeast Asian Nations (ASEAN) to establish the China-ASEAN Free Trade Area (CAFTA) in the year of 2010, which will has huge impact on both side. China is abundant in human resources as well as ASEAN; they both play the role of"manufacture centre"of the international multinational corporations from the West. And the problem is that they both rely on FDI to economic development, which would make them compete with each other for FDI.In this essay, we stand on the view of China, to analyze the impact that CAFTA may cause. The first chapter explains the theme of this essay. The second chapter mainly deals with theories and researches that scholars have done before including the relationship between free trade and FDI, the FDI effects of a free trade area; FDI empirical research results. In chapter 3, we mainly study the process of free trade formation and the impact on ASEAN countries' FDI into China, based on the analyses of ASEAN exports to China and the ASEAN FDI into China. At this stage trade of liberalization, the trade creation effect overweight investment creation effect. Chapter 4 is discussing the FDI impact from non-member countries. Chosen the world's FDI leading source countries: EU, the US and Japan, we judge the competition between China and ASEAN, although there is competition, but not so evident. Most importantly, the establishment of the CAFTA will increase the total FDI inflows as a whole, and the Chinese industries which have competitive advantage will benefit from the increase of the FDI inflow. And in the last chapter, there are brief conclusions of this essay.