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Foreign Direct Investment And Trade: An Empirical Investigation Of The Evidence From China

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Author Info
Chen Chunlai

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Abstract

The main objective of this study is to investigate the relationship between foreign direct investment (FDI) and trade and further to examine the impact of FDI on trade from the evidence of China. Some earlier theoretical work has predicted either a substitute or complementary relationship between FDI and trade yet some empirical studies have revealed a positive relationship between FDI and trade. In this study, using the recent FDI and trade data of China, we find that FDI has a positive impact both on China's provincial trade and on China's bilateral trade. It argues that given the overwhelming dominance of developing source countries and their labour-intensive investment pattern in China, FDI is mainly export-oriented and, therefore, has a positive impact on promoting China's international trade. JEL: F14, F21, C12

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Paper provided by Chinese Economies Research Centre in its series Working Papers with number 97_11.

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Handle: RePEc:wop:cercwp:97_11

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  1. Markusen, James R, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-89, Spring. [Downloadable!] (restricted)
  2. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 19(1), pages 1-31, March. [Downloadable!] (restricted)
  3. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Jeffrey A. Frankel, 1995. "Is Japan Creating a Yen Bloc in East Asia and the Pacific?," NBER Working Papers 4050, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Christopher Findlay & Andrew Watson, . "Economic Growth And Trade Dependency In China," Working Papers 96_5, Chinese Economies Research Centre.
  6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  7. Jeffrey A. Frankel & David Romer, 1996. "Trade and Growth: An Empirical Investigation," NBER Working Papers 5476, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May. [Downloadable!] (restricted)
  9. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Wei, Shang-Jin & Frankel, Jeffrey, 1994. "A "Greater China" trade Bloc?," China Economic Review, Elsevier, vol. 5(2), pages 179-190. [Downloadable!] (restricted)
  11. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June. [Downloadable!] (restricted)
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  1. Rahmi Cetin & Robert Ackrill, 2006. "Foreign investment and the export behaviour of foreign and local firms: an analysis of Turkish manufacturing," Working Papers 2006/2, Nottingham Trent University, Nottingham Business School, Economics Division. [Downloadable!]
  2. Elissa Braunstein & Gerald Epstein, 2002. "Bargaining Power and Foreign Direct Investment in China: Can 1.3 Billion Consumers Tame the Multinationals?," SCEPA Working Papers 2002-13, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
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