Foreign direct investment in services and manufacturing export sophistication in China

ABSTRACT

This study investigates the impacts of FDI in services on the sophistication of the total export and the domestic added components of manufacturing firms in China, utilizing the policy of FDI access relaxation in services as an exogenous shock. The results show that FDI in services increases the sophistication of firms’ total export, but decreases the sophistication of domestic added components. Increasing the use of imported sophisticated inputs is a potential influencing mechanism of FDI in services.

KEYWORDS:

• FDI in services
• export sophistication
• foreign and domestic inputs
• China

JEL CLASSIFICATION:

• F10
• F21

Data availability statement

The data for this study are available on request.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The FDIr from 2000 to 2001 is based on the 1997 Catalogue. The FDIr from 2002 to 2004 is based on the 2002 Catalogue. The FDIr from 2005 to 2007 is based on the 2004 Catalogue. The FDIr from 2008 to 2011 is based on the 2007 Catalogue. The FDIr from 2012 to 2013 is based on the 2011 Catalogue.

² sFDI indicates the increase in FDI in services and FDIr indicates the decrease in FDI in services. When we use FDIr as the independent variable, the results remain consistent with the main findings. We convert FDIr to sFDI, because the results based on sFDI are easier to understand.

Additional information

Funding

This research was supported by the National Social Science Fund of China [19BJL107]