The Role of Processing Trade and FDI in China's Economic Growth

摘要

Based on VAR mode and using Granger causality test approach and variance decomposition, this article examines the role of processing trade and foreign direct investment (FDI) in China's economic growth, and gives an empirical analysis and test of the dynamic correlation between FDI and processing trade. The empirical result shows that the rapid growth of China's economy has attracted a large amount of FDI and promoted the rapid growth of processing trade. There is a long-term equilibrium relationship between FDI and processing, and the variables influence each other through long-run equilibrium relationship. In the short term, FDI and processing trade will not be significantly affected by long-run equilibrium relationship, while economic growth will be significantly affected by long-turn equilibrium relationship.