HOW DOES FOREIGN DIRECT INVESTMENT (FDI) AFFECT CHINA'S EXPORTS TO OECD COUNTRIES

Abstract

This paper empirically investigates the impact of inward FDI on China’s export performance to OECD countries, employing a panel dataset that incorporates 34 OECD members with the time-span from 1997 to 2012. The estimation is conducted by utilizing an augmented gravity model with country and year fixed effects. LSDV (Least Square Dummy Variable) regression results on FDI indicate a positive and significant effect of FDI inflows on China’s exports to OECD members. This result suggests that inward FDI plays an important role in China’s exports to its top trading partners, and enables China to take the leadership of the exporting rank in the world.