| With the deepening of economic globalization, as the two most important forms of international economic activities, Foreign Direct Investment (FDI) and International Trade are connected with each other more and more closely. Along with rapid economic development of China, the scale of FDI and trade in China become larger and larger. Therefore, scientifically grasping the relationship between FDI and trade, as well as the harmonization of policy objectives, have been referred to the strategic height. Taking into account the important position of EU in China's attracting FDI and developing trade, this paper takes EU for example. By doing empirical research on the relationship between EU's FDI in China and Sino-EU bilateral trade, this paper aims at putting forward reasonable countermeasures and suggestions on promoting FDI and trade.Firstly, this paper makes a summary of the research on the relationship between FDI and trade written by domestic and foreign scholars. Secondly, this paper describes the development of EU's FDI in China and Sino-EU bilateral trade. By reviewing the course of development of the EU's direct investment in China and summarizing periodical change of the Sino-EU trade, this study clarifies not only EU's FDI in China possesses a series of typical characteristics, such as taking occupation of the market of China for investment motive, large-scale investment projects, a high rate of investment performance, investment projects with high technical content and the relative concentration of investment in regional distribution, but also the trade between China and EU has great complementarity and development potential. After the above qualitative analysis, by introducing a series of variables in the model, such as the annual data and cumulative stock of EU's FDI in China, the import and export trade between China and EU and the annual amount of China's GDP, with the data between the year of 1984 and 2007, this paper performs empirical test of the relationship between EU's FDI in China and Sino-EU bilateral trade. In order to eliminate the impact of price factors, this paper regards the price in 1984 as the price of the base year and separately does price adjustment and logarithm of treatment on the relevant data. On the basis of strict stationarity test, co-integration analysis and granger causality test, this thesis adopts OLS regression methods to perform empirical test of the long-term equilibrium relationship and adopts error correction model to analyze the short-term relationship between EU's FDI in China and Sino-EU bilateral trade.The result shows that in the long run EU's FDI in China has steady positive correlation with Sino-EU' import and export trade. Every one percentage point change of the cumulative stock of EU's FDI in China, will bring 0.591 percentage point change of export to EU in the same direction and 0.288 percentage point change of import from EU in the same direction. Besides, granger causality test indicates there is causality from EU's FDI in China to Sino-EU bilateral trade, but not from Sino-EU bilateral trade to EU's FDI in China. At the same time, in the short run, the speed of adjustment of the relationship between EU's FDI in China and Sino-EU bilateral trade from short-term deviation to long-term equilibrium is relatively fast. The speeds of correcting non-equilibrium each year are separately 58.2 percent and 41.4 percent than the previous year.At last, on the basis of the above qualitative analysis and empirical test, this paper puts forward relative countermeasures and suggestions on promoting EU's direct investment in China and Sino-EU bilateral trade as well as deepening comprehensive strategic partnership between China and EU in the future, such as how to coordinate foreign investment and trade policy, actively guide EU's direct investment in China, increase the breadth and depth of opening up of the service sector, implement "going out" strategy and change the method of utilizing foreign capital. |
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