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2006•Journal of International TradeRequires access

The Relationship between FDI and China's Foreign Trade——Empirical Analysis Based on Different Trade Modes

Yu Gao

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Abstract

Based on the statistical data between 1981 and 2004, this paper establishes error correct model to analyze the effect of inward foreign direct investment on foreign trade under different trade modes in China. Studies shows that there is long-term equilibrium between FDI and processing trade, but there isn't long-term equilibrium between FDI and common trade. In the short run, FDI promotes both import and export of processing trade, but neither import nor export of common trade is sensitive to the change of FDI.

About this research paper

What this paper is about

Based on the statistical data between 1981 and 2004, this paper establishes error correct model to analyze the effect of inward foreign direct investment on foreign trade under different trade modes in China. Studies shows that there is long-term equilibrium between FDI and processing trade, but there isn't long-term equilibrium between FDI and common trade. In the short run, FDI promotes both import and export of processing trade, but neither import nor export of common trade is sensitive to the change of FDI.

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Available abstract

Based on the statistical data between 1981 and 2004, this paper establishes error correct model to analyze the effect of inward foreign direct investment on foreign trade under different trade modes in China. Studies shows that there is long-term equilibrium between FDI and processing trade, but there isn't long-term equilibrium between FDI and common trade. In the short run, FDI promotes both import and export of processing trade, but neither import nor export of common trade is sensitive to the change of FDI.

Key concepts: Foreign direct investment, Economics, China, International economics, International trade, Export trade, Error correction model, Econometrics

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