An empirical analysis of the relation between imports and exports of China’s foreign-invested enterprises based on vertical specialization


Based on vertical specialization, and analyzing the cointegration relation, Granger causality tests, the ECM and Impulse response functions, the chapter comes to the following conclusion: there is evidence of a long-run cointegrating relationship between the imports and exports of FIEs in China; in any case of disequilibrium, the system will converge towards equilibrium. The policy implication of the exercise is straightforward; namely, linkages between imports and exports appears to be important for rebalancing China’s foreign trade, notably due to vertical specialization.

Key words

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