Fdi And International Trade Relations Of China's Mechanical And Electrical Industry

Due to the rapid development of FDI and international trade in recent years, many foreign and domestic scholars study on the relationship between FDI and international trade, and many theories are proposed at the same time. In order to testify the applicability of these theories on the specific industry in China, the author focuses on China's machinery industry, based on the data of China's FDI, China's import and export volume of machinery products and foreign companies' trade volume of machinery products. According to international trade and FDI theories, the author constructs an econometric model which uses Co-integration methods, and tests the existence of a stable and long-term relationship between FDI and China's import & export volume of machinery products. Meanwhile the Granger Causality Test on FDI and China's import & export volume of machinery products is given. These tests show that there is a stable and long-term relationship between FDI and China's export volume of machinery products; FDI is the Granger Cause which promotes the export of China's machinery products; there exists no stable or long-term relationship between FDI and China's import volume of machinery products.In addition, the import & export situation of foreign companies in China and their contribution degrees to export of machinery industry are also analyzed from micro level, and it is concluded that foreign companies in China have contributed significantly to China's import and export volume of machinery products. However the analysis suggests that we are still facing such problems as high dependence on foreign companies in machinery industry and lower export growth rate of state-owned companies. Therefore the findings of this paper might provide some suggestions and references for policy-making of machinery and similar industries.