Export Effects Of China's Fdi Inflows

International trade and global direct investment are two mostimportant economic activities; therefore, their mutual relationshipshould be discovered so as to produce a harmony of the policies on thetwo. As the quickening globalization, the connection betweeninvestment and trade is close increasingly. Foreign Direct Investment isbecoming the main strength for influence the export trade in China. As awhole, the interaction and interrelation between export trade and FDIare strengthened day by day. Therefore, it has been a hot research topicon how to evaluate the impacts of foreign direct investment on China'sexport trade. Furthermore, as China has been a formal member of WorldTrade Organization, there is an implicit interrelationship betweenChina's export trade and international capital flows, and hence how tomake an objective evaluation on the internal relationship between FDIand export trade has been another research purpose of this dissertation.Based on China's economic data during the period of1981-2005,the co integration and error correction model analysisreveals that FDI mainly promotes the development of China'smanufacturing export, which means that FDI also helps to enhanceChina's export structure. The empirical results are as follows:Firstly, the FDI in China is playing more and more important rolein export as well as improving the structure of China export.Secondly, foreign companies help the export goods to strengthentheir comparative advantages.Thirdly, there has positive co-integration and exists a strongcomplementary relationship between exports and FDI.Additionally, some possible explanations are given afterconsidering the characteristics of exports and FDI in China. And the lastpart of this dissertation forwards some policy recommendations forimproving trade competitiveness of our country. Analyzed from the following respects: FDI policy, processing export, industrial structurein order to improve our country foreign trade competitiveness andpromote the development of export trade. We should raise scale thatFDI introduce and utilization efficiency.This dissertation also analyzes the impact of FDI on China's exporttrade directly and indirectly from the theory and demonstration. TheForeign Direct Investments has driven the growth of the total amount ofour country export trade, enlarged the scale to a great extent, promoted anet increase of its export volume, and will also have a positive impacton optimization of our country's export structure. Meanwhile, It is alsonoticed the limitation of Foreign Direct Investments on China's tradewhen it brings about an advance. Nowadays, if our country wants FDIto drive development of trade at a high speed, we should overcome thelimitation soon while carry out FDI policy taking competition advantageas direction; improve processing trade technological content whileregarding the middle input as chaining to expand processing trade'sinvolving degree; optimize the structure of industry which the foreignenterprise invests in so as to drive the upgrading of industrial structureof our country;encourage the overseas-funded enterprise to develop theactivity of studying and developing in China which aimed at raising thetechnological content of the export product. These will help us to realizethe goal that the export of advanced capital goods promotes theupgrading of industrial structure, and then further drive the benign cycleof the export structure optimization.