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Frontiers of Economics in China

Front. Econ. China    2007, Vol. 2 Issue (3) : 404-423
An empirical study on “the US-China trade deficit produced by FDI”
CHEN Jiyong, LIU Wei
Department of World Economics, Economics and Management School, Wuhan University, Wuhan 430072, China;
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Abstract This article makes an empirical study on the magnifying effect produced by foreign direct investment (hereafter called as FDI) on the US-China trade deficit through co-integration analysis and error-correction modeling. By combining the empirical results, we give out our own opinion that the expansion of the US-China trade deficit is supposed to partly ascribe to the fact that processed industry is the main path of FDI and to Counter sales and trade diversion which are produced by exports on reproduced production by foreign enterprises in China. On the above-mentioned basis, this article concludes that in order to reduce the US-China trade deficit effectively, we are supposed to expand our domestic demand, perfect our inviting-investment policies, implement FDI in China and quicken up the going out  of our enterprises.
Issue Date: 05 September 2007
 Cite this article:   
CHEN Jiyong,LIU Wei. An empirical study on “the US-China trade deficit produced by FDI”[J]. Front. Econ. China, 2007, 2(3): 404-423.
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