Developing Countries, The Introduction Of Fdi And Foreign Trade Development

In the progress of the globalization of economy and liberalization of trade and investment, the relationship among nations becomes closer, and the interdependence is strengthened. There are a large variety of methods and channels for the countries to enter the world integration, of which the most important ones are international trade and international direct investment. The composition of forces of the worldwide interrelation, interaction and inter-promotion accelerates the development of all countries, including the developing ones. The developing countries, too, participate in the world economic integration through foreign trade and the introduction of Foreign Direct Investment (FDI for short). Compared with direct investment abroad, the introduction of FDI will bring more benefit with less cost. In addition, regarding the developing countries, export is the focal point to promote the economy. The developing countries are therefore confronted with a very important realistic problem: as for one nation, what is the relationship between FDI introduction and foreign trade?On basis of direct investment theories of the western world, and from the developing countries' point of view, this article makes an investigation into the introduction of FDI and its relationship with the development of foreign trade. This article falls into four chaptersChapter 1 determines the basic definitions and terms, aim of the article, as well as the structure arrangement. It provides a preliminary premise and preparation for the analysis in the following chapters.Chapter 2 elaborates two international leading theories on FDI and foreign trade development, namely, trade and investment substitution theory of Mundell and trade and investment supplement theory of Kojima Kiyoshi. Moreover, the theories are extendedly applied in the field of introduction of FDI and foreign trade development in the developing countries, and a brief estimation is made.With the application of positive analysis, Chapter 4 employs econometrics to analyze the relationship between the introduction of FDI and foreign trade development in the developing countries. Examples are set to prove that the relationship between the introduction of FDI and foreign trade development will be different in different industries: more supplementary in the labor-intensive industries; and more substitutional in capital-intensive and technology-intensive industries.A conclusion is drawn in Chapter 4: the developing countries should strengthen the introduction of FDI during the development of the economy with different emphasized attention, so that foreign trade can be developed, and industrial structure can be at the same time improved.