Does the Host Country Trade Protection Promote China’s Outward Foreign Direct Investment? ——From the Perspective of Trade Costs
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Abstract By analyzing the mechanism of trade costs on enterprises’ investment decision and using the data of China’s investment flow to 83 countries and regions during the period from 2004 to 2015, this paper applies SYS-GMM to examine the impact of trade costs on China’s OFDI. The results of the overall sample and subsamples show that the increasing trade costs inhibit China’s OFDI, which to some extent explains the “paradox” that trade liberalization leads to the OFDI growth. Overall, China’s OFDI decreases by 1.207% when the cost of trade rises by 1%. The implication of the findings is that the “Tariff Jump” theory, that the increase of trade costs promotes the OFDI, is not consistent with China’s current situation. It also means that the feasible way for Chinese government to promote OFDI is to break down trade barriers from the macro level and to reduce the bilateral trade costs with the host country.
LI Min-jie,WANG Jian. Does the Host Country Trade Protection Promote China’s Outward Foreign Direct Investment? ——From the Perspective of Trade Costs. Economic Survey, 2019, 36(2): 056.
2019, Vol. 36 
