The study of the relationship between European Union direct investment in China and China's export structure to European Union

The European Union (EU) is one of China's most important sources of foreign investment and biggest export markets. The foreign direct investment (FDI) of EU in China and the Sino-EU trade now are experiencing a high speed development period. What are the general and specific situations of EU’s FDI in China and China's export commodity structure to EU? How is the correlation between them? In this thesis, these problems are analyzed with emphasis. We are trying to answer them by using both theory and empirical analysis. First, according to literature review and practical experience, we expound the basic mechanism of how FDI influences the host country’s export commodity structure— capital formalization and technology spillovers. We trace the development of EU’s FDI in China and Sino-EU trade to try to verify a series of speculation. After dwelling on their general situation respectively, our preliminary analysis roughly indicates the statistic correlations between them. Secondly, by previous summarization, we found that Germany, the United Kingdom, France, Italy, and the Netherlands are China’s most relevant partners, in both FDI and export trade. So, we discuss specifically the industry distribution, regional distribution and investment method distribution of the FDI from those major partners, the operating conditions and export share of their enterprises in China. Thirdly, we adopt empirical methods to give further conclusion. By using Gravity Model of Trade and economics software Eviews, we analyze the relationship between FDI from EU and the export structure of manufactures from China to EU, and found that FDI export promotion effect on the impact of high-technology-intensive from Netherland, Germany and Great Britain is the largest, other member countries usually have a large effect on primary export products. And finally, we use Solow Model to quantitatively identify the existing of EU’s FDI technology spillover to China, which is not so obvious comparing to the leading positive impact to China’s technological progress from Southeast Asia, but is higher than that of the U.S.