The relationship between FDI and international trade : evidence from P.R. China and OECD

Liu, Zhiyuan

Abstract

This study examines the relationship between foreign direct investment (FDI) and international trade. It aims at offering a unified representation of trade-FDI cycles to better understand the process of internationalisation via exploring the trade-FDI relationship and related impacts on economic growth, both of the home and the host country. In particular, it makes inquiries into the relationships between trade and FDI for developing countries and developed countries, being inspired by the product life cycle of Vernon (1966). It attempts to answer the question of whether the relationship between trade and FDI is complementary or substitute in the conjecture of a trade-FDI cycle. Further, it scrutinises the factors that contribute to the relationship between trade and FDI, and the ways in which these factors play a role and exert their effects.

The thesis examines empirically FDI-trade relationships for Organisation for Economic Co-operation and Development (OECD) countries and China, in the derived analytical framework and with the adapted models. Pooled panel data ranging from 1988 to 2012 are applied, covering 23 OECD developed countries and China. The evolving relationships fit into the phases and cycles reasonably satisfactorily, lending support to the conjectures and hypotheses developed in this study. The trade-FDI cycle is expressed as follow:

This research contributes to the existing literature by examining the trade-FDI relationship in a dynamic trade-FDI cycle. Moreover, it provides a clear path that demonstrates how a country achieves its development by attracting inward FDI, utilising trade, and taking advantage of outward FDI. Another obvious extension of this study is its systematic review of the determinants of trade and FDI, and its defining of the factors that drive the cycle of trade and FDI relationship. This gives a more comprehensive insight into the nature and patterns of the trade-FDI relationship, and how they interact with each other.

Citation

Liu, Z. The relationship between FDI and international trade : evidence from P.R. China and OECD. (Thesis). University of Hull. https://hull-repository.worktribe.com/output/4215563

• Thesis Type: Thesis
• Deposit Date: Apr 15, 2014
• Publicly Available Date: Feb 23, 2023
• Keywords: Business
• Public URL: https://hull-repository.worktribe.com/output/4215563
• Additional Information: Business School, The University of Hull
• Award Date: Sep 1, 2013