Dissertation > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Exchange rate,foreign financial relations

The Foreign Trade’s Scale Effect of China’s Out-ward Foreign Direct Investment

Author LiuZongMin
Tutor ZhanBaiMing
School Central South University for Nationalities
Course Western Economics
Keywords OFDI Foreign trade scale effect
CLC F832.6
Type Master's thesis
Year 2013
Downloads 40
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With the deepening of the progress of China’s economy entering into the globaleconomic integration, China’s out-forward foreign direct investment (OFDI) hasformed a trend of faster growth, and been in the rising stage. Since2008, China’sout-forward direct investment flows accounted for more than1%of GDP. In2010, netforeign direct investment reached$68.81billion, more than Japan, the UnitedKingdom and other traditional investment power for the first time, getting a highrecord. As the end of2010, China investors have set up16000overseas foreign directinvestment enterprises, located in178countries around the world. And the OFDI hasbeen covering all sectors in the industry in China’s national economy. At the sametime, foreign trade develops rapidly, which totaled$2.974trillion in2010, accountingfor49%of GDP. So studying the relationship between them has a very importantsignificance.The paper is aimed to study the Chinese foreign trade’s scale effects of ChinaOFDI to different country’s, to study the Chinese foreign trade’s scale effects of ChinaOFDI in different industries and to study the Chinese foreign trade’s scale effects ofdifferent type of China OFDI apparently by adopting the method of theoretical studyand empirical testing.Firstly, this article reviews the trade theory and empirical researches on therelationship between foreign investment and foreign trade made by the foreign anddomestic scholars. From the previous studies, we can see that the connection betweenout-forward foreign direct investment and foreign trade expresses a complementaryrelationship, an alternative relationship or an unclear relationship.Secondly, the paper analyses the Chinese foreign trade’s scale effects of ChinaOFDI on the base of theories of the interrelation of foreign direct investment andforeign trade. The main conclusion of the paper is that OFDI of different type and indifferent industries differently affects the scale of foreign trade; but as a whole, ChinaOFDI expands the scale of foreign trade of China to some extent.Then, in the part of the empirical testing, the paper analyze the foreign tradescale effects of China’s OFDI to different countries and regions, the foreign tradescale effects of China’s OFDI in different industries and the foreign trade scale effectsof different type of China’s OFDI by the quantitative analysis methods based on thepanel data from the year of2004to2010. And we can get the following consequences.Firstly from the country apart, our country’s direct investment can promote ourcountry’s total trade export and import trade. However, this complementary effect is significantly small. By contrast, the trade scale effect of the FDI is smaller, but theeffect of resource endowment (represented by the gap of two country’s GDP) is bigger.It may because that China’s foreign trade is mainly based on the differences inresources. Secondly every industry’s OFDI has promotion effects to foreign tradeexcept the Resident Services’.The Construction industry the biggest size of scaleeffects to trade including total trade,the exporting trade and importing trade. And thefinance industry has the least. Resident services has inhibitory effect on export tradesmall promoting effect on import trade, and thus has the smallest role of the totaltrade in all industries. Thirdly, different types of Chinese foreign direct investmenthave different size of the trade scale effect. The trade scale effects of resource-seekingoutward foreign direct investment are slightly bigger than that of the market-seeking.However that of the technology-seeking outward foreign direct investment trade ismuch smaller than them.At last, according to this conclusion, combining with the analysis of the present,this paper put forward some counter measures in respect of both the government andenterprises to promote our country’s development of direct investment and trade.

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