China's Foreign Direct Investment And Trade Effect Research

In recent years, with the rapid development of international trade, China’s foreign directinvestment is also increasing gradually.The relationship between international trade andforeign direct investment has become one of the most important issues among scholars’researches. In the past, the majority of scholars made promoting effects of foreign directinvestment in the export trade as their main research content, which focused on the relationshipbetween foreign direct investment and trade effects in the host country to verify alternative orcomplementary effects. Recently, they have began to regard the home country as the researchobject, with the latest trade gravity model to study the FDI’s effect in the home country’s importand export trade.Firstly, the paper introduces macro national trade theory of scholars at home and abroad,and then transit to the relationship between FDI and national trade relations theory andempirical research at the micro level. Furthermore, on the basis of a brief overview of China’sforeign direct investment position in2011, elaborates the theory of Chinese foreign directinvestment and trade effects, which highlights China’s foreign direct investment in six aspectsof trade effect, influencing factors of these effects and their path mechanism. Followed by theperformance of the gravity model, empirical test comes that the external direct investmentcontributes to trade creation and there are country-specific and regional differences. Ultimately,the panel data regression results verify the two assumptions in the paper.In order to test the role of China’s foreign direct investment thoroughly,30countries areselected as cross-sectional sample, which have important trade relations with China. With samecoefficients, different intercept and fixed effects of gravity model, synthetic data regression isconducted to verify Chinese foreign direct investment stock in export trade effects and importtrade effects. The panel data model regression results show that China’s foreign directinvestment creative effects in both export trade and import trade, which means that the growthof foreign direct investment will bring about the increase in the import and export tradevolume.The model regression results also indicates that there are significant differencesbetween countries and regions on this kind of trade creative effects. According to the test resultsof the panel model, in the text these30countries are classified in accordance with the size ofthe import trade effects of trade effects and export trade effects. They are divided into fourcategories: the import and export trade effects of double high, high export effect-low importeffect, low export effect-high import effects, as well as import and export effects of the duallow four. Combining with6influencing factors on the effects between direct investment andtrade, explains the causes of the trade creative effects and the existence of country-specific andregional differences. At last, the paper points out the urgent problems need to solve currently on China’s foreigndirect investment, and then combines with the conclusions of the model proposes targetedstrategies which are conducive to the sustainable development of China’s foreign directinvestment.