Research Of The Impact Of China's FDI On Vietnam–China Trade

Since the normalization of Vietnam-China relations in 1991,China has begun direct investment in Vietnam.However,in the early days,China's direct investment in Vietnam was relatively small,and it was not until 2007 that China's direct investment in Vietnam increased rapidly.Since 2015,China has been one of the top five countries in Vietnam's FDI source countries.According to the Vietnam Bureau of Statistics,China ranked fourth in direct investment in Vietnam in 116 countries and regions in 2017.In addition,China has been the largest partner of Vietnam's trade for more than a decade,and the two countries' trades have maintained strong growth momentum.Given China's FDI and trade status in Vietnam is becoming more and more important,this paper will study the issue of "China's FDI's influence on Vietnam-China trade" based on the perspective of Vietnam.Based on the traditional gravity model and based on the data from 1996 to 2016,this paper studies how Chinese FDI affects the volume of Vietnam-China import and export trade.The empirical results show that China's FDI and Vietnam-China import and export trade have a long-term stable equilibrium relationship.This result shows that the inflow of Chinese FDI will promote the growth of Vietnam-China import and export trade,that is,the introduction of China's direct investment in Vietnam will stimulate the growth of bilateral trade.At the same time,the research results also show that the impact of China's FDI on Vietnam's import growth is greater than the impact on Vietnam's export growth.From this we can see that the inflow of Chinese FDI is one of the factors leading to the Vietnam-China deficit.In addition,this paper also studies the impact of Chinese FDI on the trade structure of Vietnam-China import and export.This paper classifies Vietnam's import and export commodities into four categories: raw materials,intermediate goods,consumer goods and capital goods,and treats them as explanatory variables respectively.The amount of direct investment in China is used as an explanatory variable and establishes a linearity.Regression model.The empirical results show that,first,the export of raw materials and consumer goods and China's FDI in Vietnam show a synchronous growth,indicating that China's FDI inflow will play a positive role in improving the trade structure of Vietnam and China.Second,the import of intermediate goods and consumer goods and China's FDI in Vietnam has shown simultaneous growth,which means that Chinese FDI companies in Vietnam also rely on intermediate imports from China,and also reflect the relatively low level of development of Vietnam's auxiliary industries.In addition,the Vietnamese market still relies on Chinese consumer goods.This point also shows that the import substitution effect produced by China's FDI is very weak.Finally,based on the results of empirical research and in combination with China's current status of direct investment in Vietnam,this paper proposes two sets of policy recommendations: policy recommendations for the introduction of FDI in China and recommendations for improving the quality of FDI in China.