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On the Issues between FDI in China and Sino-U. S. Trade Balance
Guobing Shen
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Abstract
On the issues between FDI in China and Sino-U. S. trade balance, my findings show that firstly, there are no stable cointegrating relationships between China's foreign trade (exports and imports) and FDI in China respectivly. However, there is unidirectional Granger causality from the change of FDI in China to the fluctuations of China's foreign trade (exports and imports). Secondly, there are bidirectional effects between China's exports to trade surplus with the U. S and FDI in China at 95% level. The conclusion is consistent with that from U. S Census Bureau monthly data. Thirdly, foreign-funded and Chinese enterprises altogether produce and export labor-intensive, capital-intensive and tech-mature products required for the U. S. U. S. -China trade deficit belongs to complementary goods deficit, which is beyond Sino-U. S trade and is caused by trade deficit shift and substitution effect from FDI including U. S. multinationals in China to a large extend.