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Vertical specialization, FDI and China’s import–export imbalance

Abstract:

This chapter examines linkages between FDI and the import-export imbalance in China based on data covering for the period 1980–2010. The results show that there is a positive link between the growth of FDI and China’s surplus. We attribute such effects of FDI to vertical specialization. The results for foreign invested enterprises (FIEs) show some evidence of FDI playing a leading role in the development of the trade surplus.

Key words

Vertical specialization

FDI

Exports

Imports

Imbalance

Introduction

The effect of FDI on the host country’s balance of trade can be an analysis from the perspective of exports and imports. Based on “Balance of Payment stage” theory, ...

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