Research On The Trade Effect Of China’s Foreign Direct Investment

In the process of economic globalization, international trade plays an important role to the economies involved in the trade and in accelerating economy development of the world. Since China joined the WTO, foreign trade has made great contributions on stimulating economic growth and promoting the upgrading of industrial structure. However, along with the continuously rising status of China in the international trade, all sorts of trade protection measures to Chinese goods, which include the technical barriers, environmental barriers, trade remedy and so on, bring great losses to our export. Combined with the financial crisis and the European debt crisis, our foreign trade faces a more difficult situation. As we know, international direct investment and international trade are two important ways of globalization for a country. Whether we can promote the development of trade by increasing foreign direct investment or not is an issue worth studying.The investment motives influence trade effect. For developed countries, in order to reduce the operating costs and make use of competitive advantage, their motives include market seeking, efficiency seeking and resource seeking. With the purpose of learning from foreign advanced technology and management experience, the motives of developing countries include strategic asset seeking, resource seeking and market seeking.This paper analyzes the trade effect of China’s foreign direct investment from the perspective of investment motives. Based on the international trade theory, foreign direct investment motivation theory and trade and investment relationship model, this article adopts the method of theoretical analysis and empirical analysis. In theoretical analysis part, we first analyze the export and import effect of foreign direct investment, and then we study the investment trade orientation of different motives, lastly we analyze the trade effect under each motive’s investment. The regression results show that Chinese foreign direct investment and trade are complementary under the motives of strategic assets seeking and resource seeking, and so as the market seeking except for certain circumstances. In empirical analysis part, we select panel data from2008to2012including55countries, then divide these host countries into three groups according to the motives with the Ward System Clustering method, and use fixed effects regression method to inspect export and import effects under different investment motives. From the regression results we can conclude that China’s foreign direct investment of various motives is trade creation effect. In terms of overall trade effect, the resource seeking investment is more apparent than market seeking type, and the strategic assets seeking type ranks the last.