A Study On Trade Effect Of China’s Outward FDI

The paper studies on the development of China’s outward foreign direct investment(OFDI) from2008to2012and its trade effect. According to three investmentmotivations, namely resources-seeking, efficiency-seeking and strategicassets-seeking, which are manifested and matched by42investment destinations, thecorrespondent trade effects, including trade scale effects, trade balance effects andtrade structure effects, are discussed in order to summarize the mechanism throughwhich China’s OFDI has an influence on China’s foreign trade.In detail, there are15categories of trade effects, which are export scale effect ofresources-seeking OFDI, import scale effect of resources-seeking OFDI, tradebalance effect of resources-seeking OFDI, export structure effect ofresources-seeking OFDI, import structure effect of resources-seeking OFDI, exportscale effect of efficiency-seeking OFDI, import scale effect of efficiency-seekingOFDI, trade balance effect of efficiency-seeking OFDI, export structure effect ofefficiency-seeking OFDI, import structure effect of efficiency-seeking OFDI, exportscale effect of strategic assets-seeking OFDI, import scale effect of strategicassets-seeking OFDI, trade balance effect of strategic assets-seeking OFDI, exportstructure effect of strategic assets-seeking OFDI, import structure effect of strategicassets-seeking OFDI.In terms of research methodology, the design refers to Gravity Model modified byEaton and Tamura (1994), based on which with a combination of China’s condition,empirical models containing variables influential on China’s foreign trade scale,trade balance and trade structure are established to test the trade effects mentioned inthe previous paragraph. The regressions are processed in Stata11.0withcomparisons between Pooled OLS (ordinary least squares), Panel Data Fixed EffectsRegression, Panel Data Random Effects Regression, First Difference GMM(Generalized Method of Moments) and System GMM.The results show that China’s OFDI is export and import complementary which ismainly attributed to efficiency-seeking OFDI. In terms of trade balance, the generaleffect is not significant but strategic asset-seeking OFDI is healing the large tradebalance. Efficiency-seeking OFDI also contribute to the degrading export and importstructure. The estimation result above indicates that China is actively gettinginvolved into the new industrial transfer around the globe by taking over capital andtechnology intensive industry from developing countries while transferring lobarintensive industry to less developed regions such as ASEAN and Africa.