The Influence Of Foreign Direct Investment On China's Export Sophistication

China's export structure has shown a rapid shift towards more sophisticated industries. While some believe that this trend is a result of processing trade and foreign direct investment, the evidence is mixed. This paper examines variations in level of export sophistication across China's manufacturing industries. The author finds that an industry's level of export sophistication is positively related to the share of wholly foreign owned enterprises from OECD countries and the share of processing exports of foreign-invested enterprises, and negatively related to the share of processing exports of indigenous Chinese enterprises. Evidence from the relative export prices of Chinese goods, which measure within-product export sophistication, shows a similar pattern. The main structure of this paper shows following:Firstly, the author will study on China's export sophistication via empirical review, and figure out how FDI and processing trade impact on China's export sophistication.Secondly, the author will calculate different industry's sophistications. And then the author will make industry's sophistications and export goods'prices as dependent variables, and does regression analyses. After these analyses, there are evidences on which factors impact on China's export sophistication. The regression analysis will commit both in transversal level and horizontal level.Finally, combine with empirical study and regression analysis results, the author will give suggestions for industry chain's value increases.