The Empirical Study On Trade Effect Of China's Direct Investment In Developed Countries

It has been more than ten years since China implemented the "Going Global Strategy". China has become not only a trading power but also a capital exporting power now. Though developed countries still make up a small proportion of foreign direct investment stock of China, the investment in occident composes more than 50 percent of gross outward foreign direct investment of China during January to July 2012, according to the latest data released by the Ministry of Commerce. The import and export of China are highly dependent on developed countries. There are big trade surplus and recurrent trade friction between China and developed countries. Developed countries are most important cooperative partner of China no matter on foreign trade or foreign investment. Foreign direct investment and foreign trade are two main ways of international economic exchanges. It's necessary to analyze the relationship between the two ways, for better development and significant progress in economic cooperation with countries all over the world.In the studies of the effect of direct investment, there is no much research on inverse investment from big developing countries like China to developed countries. The existing studies of the effect of direct investment are about investment in developing countries from developed countries. The main conclusions are the substitution effect, the complementary effects or the combined effect. This paper selects 20 countries including United States, Canada and Australia as sample of developed countries, studies the trade effect of China's direct investment in developed countries. Based on gravity model and generalized least squares method, utilizing the data of trade outward FDI from 2003 to 2010, an empirical analysis has been made on both export and import. And then studies the trade effect of China's direct investment in developed countries in manufacturing. The result shows that China's direct investment has complementary effects on the bilateral trade, so does in manufacturing. The complementarities are more obvious in import trade than in export trade, and less obvious in manufacturing than in overall. We can use the difference between effects on import trade and export trade and increase the direct investment in developed countries to promote imports more than exports. It's helpful to ease trade imbalance between China and developed countries.The development of foreign direct investment is an important task for China. The "China's 12 th Five-Year Plan" also pointed out that we need to speed up "Going Global" and improve cross-section coordination mechanism. China should meet the opportunities and challenges faced by foreign direct investment, to further expand the sustainable development of foreign direct investment, particularly with the developed countries.