Influence of German, French, British and Dutch Direct Investment in China on the Structure of Bilateral Trade

Based on the 2001-2010 panel data, this paper describes the German, French, British and Dutch investment in China and empirically studied the impact of the four countries’ direct investment on China's import and export structure. Research shows that every 1% increase of the four countries’ FDI in China’s manufacturing industry causes a 0.44% growth in China’s import from these countries and a 0.7% growth in export to these countries. Every 1% increase FDI in electrical machinery and equipment industry in investment causes a 0.45% growth in import and a 0.39% growth in export. Every 1% increase of FDI in transportation industry promotes a 0.39% growth in import and a 0.31% growth in export. And every 1% increase of FDI in leasing and business service industry every 1% increase in investment poses a 0.21% increase in import and a 0.25% growth in export. Therefore, we can see that major EU countries’ direct investment in China plays an important role in improving the structure of China's import and export.