China's Foreign Direct Investment, Export Effect Study

The rapid growth of China's outward FDI has drawn attention to the relationship between outward FDI and home country export. This paper explores linkages between China's outward FDI and its export by using both theoretical and empirical analysis. We find that the accepted conclusion which resides in most of the literatures exists in China, that is, the relationship between the two is complementary rather than substituted. The outward FDI is helpful to expand the export size, to improve its structure, and to enhance its competitiveness. The intermediate goods and capital goods that come from the export creating of FDI have pulled the export to a new level. We also find that the export-supporting effect shifts from different host countries in that firm's strategies are different and they invest in different sectors. The effect is stronger if a host country is in Asia, or it belongs to the LDC_s. But the FDI flowing to DCs show less export creating effects. It is the outward FDI that brings the new increase to the export at the moment that China's export is facing many internal and external problems. So it is necessary to explore the relationship between outward FDI and export in order to make the export grows continuously.This paper consists of four parts. The first is the literature review. The second part expresses the general path and the international experiences on the relationship between outward FDI and export. And in the third part, we examine the effects of China's outward FDI on its export. It is proved that the correlation between outward FDI and export is positive by using both theoretical and empirical analysis. The last part explains the difficulties China's export is facing, and it is hard to go further if we rely on the traditional paths solely. Proper measures must be taken to insure the export creating effect of FDI.