Interaction of Trade and FDI in Trade-FDI Cycles: Evidence from China

摘要

The study aims to explore the interaction of trade and FDI (Foreign Direct Investment) by setting up a trade-FDI cycles. Based on statistics between China and OECD countries during 1999-2009, we find that certain cycle really exists. Imports of China promote the inflow of inward FDI, so imports complement inward FDI. After four years, exports increase dramatically which means inward FDI and exports complement each other. The boost of outward FDI is caused three years later, proving that exports complement outward FDI. Because China holds certain labor advantages over the partner countries, many MNCs (Multinational Corporations) set up factory in China. They assembled their products in China with the imported main parts from their own countries. Thus inward FDI leads to the increase of import rather than decrease. Future research will focus on supporting the cycles by other countries' example, and particular explanation for each stage of the cycles.