The Trade Effects Of Foreign Direct Investment In Developing Countries

In the development of the world economy, the rapid growth of developing countries' outward FDI who are in the transition period has drawn attention. This phenomenon has challenged the traditional theories which are based on the outward FDI of the developed countries. As a result, the research on the behavior of the developing countries' outward FDI has become a hot area in the theoretical circle. Trade effect is an important part of the FDI's effects, and has drawn more attention in recent years.The research on the FDI's trade effects begin at the motive of FDI. This paper research on the following four motives of FDI: the type of market-seeking, cost oriented, source pursuing and technology seeking. According to different motives of FDI, this paper gives detailed theoretical analysis.Gravity model is a good tool to explain the direction and flow of bilateral trade, and has gained success on the empirical research in international trade. This paper select 41 countries and regions as samples, adopt the data of China's outward FDI to these samples and the flow data of import and export between the China and the samples, establish the regression model, to prove the trade effects of China's outward FDI. From the result we can conclude: China's outward FDI is export created as well as import, in a word, China's outward FDI is trade created. Finally, the paper proposes some policies to promote outward FDI.