A Study Of FDI Inflows Of Six Countries Based On The Establishment Of China-ASEAN Free Trade Area

Nowadays, the global booming of regional economic integration has an influence not only on trade, but also on investment. China-ASEAN Free Trade Area is the first FTA that China has signed. With a long period of establishment and mature progress, it is suitable for carrying a research on influence of foreign direct investment. This dissertation aims at using the bilateral country-specific data, and analyzing the influence on attracting FDI of CAFTA countries, especially China, based on the establishment of CAFTA.Firstly, this paper introduces the current situation of construction of regional economic integration on a global scale, as well as its theoretical and practical meaning. The paper also shows the establishment and construction of CAFTA, following by the research framework, innovation point and the rest arrangement of the paper. Chapter Two is the literature review of regional economic integration, including the progress of Customs Union Theory, investment in regional integration, and some empirical tests of regional integration. Chapter Three mainly analyses the current situation of FDI attracting in China and other ASEAN countries through statistical data, and interprets the preferential policies of China, Singapore, Malaysia, Thailand and other countries for attracting FDI.Chapter Four is the key part of this paper, mainly using the three countries extended model from Cournot Model to analyze the progress of regional integration. This chapter forms country-specific panel data of China and other five ASEAN countries from 1996 to 2013, conducts regression analyses from three levels(from the world to the CAFTA countries, between CAFTA countries, and from CAFTA countries to China), to figure out the impact of FDI inflows because of the establishment of CAFTA. The explained variable is FDI inflows, mainly reflecting the differences of those three levels. Explanatory variables includes GDP, cost of labour, import, market intra opening degree towards other CAFTA countries of the host country. Also the model consists of dummy controlled variables of time and country. The data used in the model are from World Investment Report of UNCTAD, IMF database, China Statistical Yearbook, etc.With the result of the regression, it can be summarized into three major conclusions. Market intra opening degree towards other CAFTA countries of the host country can affect the attraction of FDI from the integration. Comparing to the other two level, this variable is more significant in the integration level, meaning the lower of barrier within the integration can induce more FDI among CAFTA countries. What's more, the higher of GDP and the lower of wage of a country, the more FDI it can attracts. Whether the absolute form of GDP and wage from the first two levels, or the relative ones from the third level, this conclusion can be reached. It is noticeable that high GDP and low cost of labour can have significant and positive influence for countries attracting FDI. In addition,2008 Financial Crisis affect the situation of China and the other five ASEAN countries of attracting FDI badly. The total time span includes time dummy variables of 1997 Asian Financial Crisis,2008 World Financial Crisis and signing of Agreement of Investment, and 2010, the completion of the FTA. The regression shows 2008 World Financial Crisis has a more serious impact on the host countries in the following year, comparing to 1997 Asian Financial Crisis.To have a better performance of CAFTA to attracting FDI, and making a greater utility of an opening market, this paper suggesting a stable growth of GDP, more input onto human resource, adjustment the relation between FDI and import, acceleration of industry transformation and upgrading, perfecting the investment environment and its supporting measures.