FDI and Host Countries’ Exports: The Case of China

From the 32nd in _978 to the 3rd largest exporting country in the world in 2004, China’s export boom was accompanied by substantial inflows of foreign direct investment (FDI) in the same period. exports by foreign-invested enterprises in 2004 were $339 billion, comprising 57% of China’s total exports. While there are considerable theoretical treatments of the FDI-export linkage, relevant empirical analyses have been limited. this paper attempts to close the gap by investigating the issue with the Chinese industrial data. the estimates indicate that FDI indeed has had a positive impact on China’s export performance, its export-promoting effect is much greater than that of domestic capital, and its effect is larger in labor-intensive industries, as one might anticipate.