Does WTO Membership Has Effects on the Trade Linkages of Inward and Outward FDI: Evidence from China

Abstract

The study contributes to the FDI-trade literature by making a first attempt at assessing the dynamics of FDI and WTO membership linkages with trade in China. Utilizing a country-level panel trade data spanning the period 2003 to 2016, we found that both FDI inflows and outflows have been trade-enhancing. Results also indicate that China’s accession to WTO would change FDI-trade relationships. We argue that as China trades with a non–WTO member country, outward FDI does have a significant positive impact on China’s exports and imports. Keywords—Foreign direct investment; foreign trade; China; WTO