The Effect Analyses Of China’s Outward Foreign Direct Investment (OFDI) To Terms Of Trade

With the development of trade liberalization and economic globalization, foreign trade has become one of the important factors for promoting national economic growth. The fundamental goal of a country’s participation in international trade is to acquire trade benefit as much as possible through the international exchange by taking advantage of its rich resources. Terms of trade, whose quality directly related to the vital interests of trade, is one indicator to measure a country’s trade gain. With today’s increasingly advancing globalization, the international direct investment develops faster and faster. Through foreign direct investment, one economy can promote its economic development by making full use of two markets and two resources at home and abroad, and can obtain advanced and appropriate technology much more proactively so as to vigorously promote domestic technology level, thus the terms of trade effectively gets improved.This paper manages to discuss the varying pattern of China’s terms of trade from the view point of Outward Foreign Direct Investment (OFDI), and tries to figure out the reason why the influence degree of China’s OFDI to the terms of trade are not consistent between the domestic industries. Combined theoretical study with empirical research, this paper analyzes the OFDI’s impact on the terms of trade, including the mechanism of OFDI’s influence on the price terms of trade, income terms of trade and factor terms of trade. From the point of industry type, this paper explores the impact of OFDI of different industries on the terms of trade. First, use the grey correlation method to establish a multi-dimensional evaluation index system. Second, build the appraisal model of Entropy-TOPSIS to calculate the influence degree of the each industry’s OFDI on the terms of trade. Finally, on the basis of status analysis, theoretical analysis and empirical analysis, this paper puts forward some policy suggestions, which can cooperate with policy objectives of government’s industrial structure adjustment, to improve the efficiency of China’s OFDI and the terms of trade. As the scale of China’s foreign direct investment expands gradually, in order to help China’s foreign direct investment policy adjustment and meet the goals of government’s industrial structure adjustment, a systematic and reasonable planning of the investment amount and direction is needed to gradually increase the OFDI’s effect on the improvement of terms of trade.