70 / 2015-08-08 19:08:52

FDI Regulation Reform and Export Sophistication: Evidence from China

FDI,export

In this paper, we empirically investigate whether FDI regulation reform
aects export sophistication. The FDI regulation reform in Jan 2002, as part
of China's commitment to its WTO partners further opens its door to FDI
and provides a window of opportunity for dierence-in-dierence (DID) identication. The estimation shows that industries in which FDI inow becomes
more encouraged experience a 1.0% to 1.5% increase for the level sophistication of its export structure. The result passes a number of robustness checks
on identication assumptions. In addition, our result also suggests that the
increase comes from a higher share of export by Foreign Invested Enterprises
(FIEs), and upgrading of FIEs, particularly wholly foreign-owned rms. Our
study broadens the understanding of China's WTO accession and its inuence on Chinese economy and contributes to the literature about FDI and
export upgrading.