The Effect Of China’s Outward Foreign Direct Investment On Export Trade

Before the2008financial crisis, China’s foreign trade had developed quickly for many years, and the net scale of foreign exchange trade had achieved consecutive surplus for14years, also the scale of foreign exchange reserves had reached1.53trillion dollars. However, during the global financial crisis, China’s export trade was severely attacked; only in2009, the scale of China’s exports trade fell by about200billion dollars. Though the2008financial crisis has gone for over5years, its influention on the world economy has presented long-term trend, the global economy is still in a period of deep adjustment after the crisis. By the end of2011, because of the slow world economic growth and the weakness in US dollar, the RMB against the dollar has raised over31percents compared with the exchange rate of the reformation time, and the export environment still very grim; export competitiveness is showing signs of decline. To hold the value of China’s foreign exchange assets, China put forward the strategy of enlarging outward foreign direct investment (OFDI), and China’s outward foreign direct investment scale had reached$52.15billion in2009and had an increase of nearly$30billion over the previous year. Now China puts forward the strategy of "going out". AS two ways to enter one country market, export and OFDI have one kind of close relationship. So a research on the relationship is realistic and significant.In the framework of Demand Theory, the paper starts from the views of the scale effect and structure effect, using general equilibrium model and theoretical and empirical, qualitative and quantitative combination method, to analyze the influence of OFDI on China’s export scale and export commodity structure. First, it will introduce the background and the significance of the relationship between OFDI and export trade, then present research ideas, research methods, innovation and deficiency. Second, the paper will summary the domestic and foreign paper on OFDI and export trade, and do a brief review. Third, this paper will review the development of Chinese OFDI, and give a detail overview on the status of the trade of China’s OFDI and export, in order to provide some ideas for the later empirical analysis. In chapter4, based on the framework of Demand Theory, this paper will introduce transmission of OFDI on the export trade, and use general equilibrium model to analysis the scale effect and the structure effect of OFDI. In chapter5, the paper qualitatively analyzes the scale effect of OFDI on export trade, then use Co-integration and VAR model to research, and give the conclusion that OFDI has substitution effect on China’s export scale in short time, but in long time it has complementary effect. In chapter6, the paper uses qualitative and quantitative methods to analyze the structure effect of OFDI, Finally, according to the conclusion and combined with the actual situation of China, the paper will provide feasible suggestion for China’s OFDI and export trade policies.