The Effect Of Exports From China’s Foreign Direct Investment In ASEAN

Exports and foreign direct investment(FDI) are very important for both countries and enterprises: For multinational corporations, exports can develop new markets. At the same time, FDI can make multinational corporations to bypass trade barriers and have a full use of local resources; thus multinational corporations are able to have a successful development. For the country, export trade is an important way of economic growth. And FDI can promote the growth and transformation of multinationals, and thus can promote industrial upgrading of the whole country.However, the relationship between exports and foreign direct investment is inconclusive yet in the past half century. Some scholars believed that foreign direct investment could enhance the strength of enterprises and decrease the exports trade. Some scholars hold the opinion that foreign direct investment could promote the export of intermediate goods of home country. Other scholars maintain that the substitution effect and promotion effect both exist in different industries and countries.China and ASEAN economic exchanges become more frequent in the recent years. With China-ASEAN Free Trade Area officially established in 2010, Chinese exports to ASEAN increased nearly twice and FDI flows to ASEAN increased by 1.77 times. In this context, did the direct investment in the ASEAN of Chinese companies substitute or promote the exports?To solve this problem, we make a literature review at home and abroad, and analyze the relationship between the export trade and FDI of different countries.This paper analysis five types of the exports effects of OFDI: positive effect of the trade creation from the production line, capital equipment and intermediate goods; positive effect of market expansion by the foreign trade companies, sales network and service; negative export substitution effect caused by the competition of the overseas subsidiaries; positive and negative effect of technology spillover caused by the diffusion of technology; positive effect of income creation caused by the employment promotion of the host country.This paper analyzes the effect of the transmission mechanism of export with different motivation of OFDI. Market-seeking OFDI leads to trading income effect and market expansion effect in the early construction, and leads to export substitution effect after overseas companies maturing; due to the vertical integration of production of efficiencyseeking OFDI, the exports of the home country, producing country, assembling country and sale country have improved, at the same time the trade creation effect and market expansion effect have been caused. Resource-seeking OFDI leads to the trade creation effect from the mining equipment imported from the mother country, export substitution effect if the enterprise produce the manufactured goods with the using of local resource and the market expansion effect if the enterprise ship the resource back to their home countries and produce the manufactured goods; Technology-seeking OFDI make it easy to obtain the technology and improve product quality and promote the exports in goods and service, and then it leads to the effect of technology spillover. Because OFDI promoted the employment of local people, income creation will always been caused no matter what the motivation of OFDI.Additionally, based on the actual situation of the FDI and export, we discussed the transmission mechanism of the export effect of Chinese FDI to ASEAN. And then, based on 2003-2013 data, we established gravity model with the variable of GDP per capita; integration of the air transport and the rail transport; and communications infrastructure. After the regression analysis of panel data, the result is that China’s direct investment in ASEAN has promoted the exports trade. The every 1% increasing of China’s FDI could make a 0.173% increasing of export trade. Additionally, this paper chooses the variable coefficient model to examine the differences of the export effects of individuals with the use of F-statistic. Finally, we summarize and put forward policy recommendations.