The Impacts Of OFDI On China's International Trade

Outward foreign direct investment of China starts later than other nations while it is in a rapid growth nowadays.The study on effects of OFDI on trade column is popular worldwide.On the contrary,study on effects of OFDI on trade structure is rare.Under the theoretical perspective of the relationship between OFDI and trade volume,early studies tended to admit substitution effect.However,more and more research results have started to prove a mixture of substitution effect and creation effect of OFDI on trade volume.Scholars abroad started on empirical analysis on OFDI much earlier.America and Korea led the way and most of their conclusion showed that OFDI could create extra trade for both host countries and home country.As for OFDI and trade structure,there are quantity methods we could us.Division of industries and binary structure theory which consists of down gradient and inverse gradient are very typical ones.As economic globalization deepen,trade is more a multilateral issue than bilateral issue,which involves countries,organization and factors.At the same time,researchers have been focus on spatial econometric perspective more often after space metrology being found.The article takes Spatial Lag Model(SLM),Spatial Error Model(SEM)and gravity model as tools,accompanied by geographical factors and data of OFDI from China to 62 other countries(24 developed countries and 38 developing countries)and trade,to study the impact of China's OFDI the trade size and trade structure of home country.We have to emphasis that this paper contributes to One Belt and One Road because we contain many countries of the system.The tests results show that China's OFDI obviously creates extra trade of its own.Down gradient OFDI contributes more this way.Also,down gradient OFDI is more easily influenced by geo factors.According to Moran I index,there exists spatial spillover effects among host countries.And most part of it comes from import.At the same time,OFDI optimizes the whole structure in manufacturing,which also improve the status of China in the global value chain caused by transferring “Marginal Industry” to other developing countries.And it is necessary to figure out that the effect of an inverse gradient OFDI effect is more remarkable.Contemporary China is facing the problem of excess production capacity and the demand of the industrial structure upgrade,OFDI is a powerful and effective method to help China to solve the problem and to achieve the goal.From what has been discussed above,we define several conclusions.Firstly,China is supposed to improve the quantity of inverse gradient OFDI to developed countries.Geo factors which don't influence much could be ignored.Secondly,China is supposed to improve down gradient OFDI at the same time,because it clearly helps China transfer its marginal industries and optimize the structure of trade.However,geo factors should be considered,because as for developing countries,geo distance may make inhibition of trade.Thirdly,while China increase the scale of OFDI,China should plan carefully on the proportion of the combination.Finally,comparing with inverse gradient OFDI,down gradient OFDI creates more trade and optimizes trade structure much better.One Belt and One Road is a strategic involving many developing countries.This paper proves the strategic with much value to some extent.