FDI And The Development Of China's Service Trade

FDI and trade in financial services are two popular questions more concerned by the acdemia. Today, with the international trade in financial services developing rapidly, China's financial services trade also maintains a relatively high growth rate. But this growth is mainly driven by imports, and the deficit is a serious problem; China's financial services is so young an industry that its competitiveness against the other countries is weak; as a new member of WTO, China's financial market is not mature; the law is not perfect and the system is not sound. These questions above came up in the process of absorption of FDI,which we should also pay more attention to in the field of China's financial services trade.This paper sets forth the influences of FDI on the development of China's financial services trade,through analysing the status quo of FDI in the financial services,and tries to give some policy advice.Chapter 1 is the part of the theoretical basis, reviewing the related theories and researches on the financial services trade and FDI. At the end of last century, the theory of FDI in the financial industry showed a trend of integration with the theory of financial services trade,under the framework of Intra-industry Trade Theory.More and more scholars began to study on the relationship between FDI and financial services trade. A large number of studies have shown that FDI in the financial industry helps promote the development of financial services trade.Chapter 2 analyses the status quo of the international financial services trade and FDI in financial industry.The international trade in financial services has maintained a high rate of growth since the end of last century.The main reasons for this are: economic globalization, the revolution in information technology, rapid development of international trade both in services and in goods,the healthy and orderly capital markets of the world, as well as the liberalization of trade in financial services under the framework of WTO and the multilateral trading system. At the same time,the financial services trade has become the most important sector for the inflow of FDI.Chapter 3 analyses the status quo of developmeng of China's financial services trade and its absorption of FDI. The development of China's financial services trade has the main characteristics as follows: rapid development, mainly driven by imports, with the deficit problem;imbalance of the internal structure that the import and export volumn of insurance is bigger than the other financial service; the weak international competitiveness,which is one of the reasons for imbalance of the import and export; the degree of openness of financial markets has gone beyond the scope of the commitments under the WTO framework.FDI in China's financial industry has developed rapidly. The stock increased rapidly, but the total is still inadequate and volatile.The insurance industry is the major sector of FDI inflow. Starting from these characteristics, this chapter analyses the factors that affect the FDI inflow, such as the traditional rules of the World Trade Organization, the relevant Chinese laws and policies, the development of China's domestic financial services, the development strategies of foreign financial institutions and so on. At the end, it also set out the main existing problems and difficulties.in the process of absorption of FDI,Chapter 4 analyzes the double impact of FDI in financial industry for the development of China's financial service trade. On one hand, it is affirmed that FDI has played an active role in economic growth, financial stability and industry changes. On the other hand, it is also pointed out that FDI also causes the negative impact to China's financial industry. For example, to allow qualified foreign institutional investors to enter China's stock market can bring a lof of money ,but it also take the risk of hot money speculation.Chapter 5 tries to give policy advice on how to make rational use of FDI to speed up the development of China's financial service trade. Because of the dual effect of FDI, it is necessary to take advantage, but also set limit, it is necessary to further liberalize the financial market, making more efforts to attract FDI, but also make it happer step-by-step. At the same time, we should also continue to deepen reform of the financial system and improve its structure. The government responsibilities is to ensure FDI flows to the sectors,regions and industries where it is really needed, through policy guidance.