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Foreign Direct Investment and Trade: An Empirical Investigation of the Evidence from China

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  • Chen Chunlai

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

Suggested Citation

  • Chen Chunlai, 1997. "Foreign Direct Investment and Trade: An Empirical Investigation of the Evidence from China," Chinese Economies Research Centre (CERC) Working Papers 1997-11, University of Adelaide, Chinese Economies Research Centre.
    • Handle: RePEc:adl:cercwp:1997-11
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    File URL: https://media.adelaide.edu.au/economics/papers/cerc/cercwp1997-11.pdf
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    References listed on IDEAS

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    1. Wei, Shang-Jin & Frankel, Jeffrey, 1994. "A "Greater China" trade Bloc?," China Economic Review, Elsevier, vol. 5(2), pages 179-190.
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    Cited by:

    1. Ioannis KOSTAKIS & Sarantis LOLOS & Eleni SARDIANOU, 2017. "Foreign Direct Investment and Environmental Degradation Further Evidence from Brazil and Singapore," Journal of Advanced Research in Management, ASERS Publishing, vol. 8(1), pages 45-59.
    2. Wu, Xiaodong, 2001. "Foreign direct investment, intellectual property rights, and wage inequality in China," China Economic Review, Elsevier, vol. 11(4), pages 361-384.
    3. Elissa Braunstein & Gerald Epstein, 2002. "Bargaining Power and Foreign Direct Investment in China: Can 1.3 Billion Consumers Tame the Multinationals?," SCEPA working paper series. 2002-13, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    4. Innwon Park & Soonchan Park, 2015. "Modes of Foreign Direct Investment and Patterns of Trade: An Alternative Empirical Approach," The World Economy, Wiley Blackwell, vol. 38(8), pages 1225-1245, August.
    5. Krüger, Ralf & Ahlfeld, Sebastian, 2005. "Ausländische Direktinvestitionen in Entwicklungsländern: Eine überschätzte Wachstumsdeterminante?," Discussion Papers in Development Economics 31, Justus Liebig University Giessen, Institute for Development Economics.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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