Question

Discuss the possible explanations about China's high trade ratio.

How do you understand the relations between trade and FDI? Explain the logic and give an relevant example.

Please write in details.

Answer 1

China's high trade ratio:- China has $2.4 trillion of foreign reserves over the last two decades. The real or structural factors are responsible for this growth. China's export-lead development strategy, massive build up of international reserve, creating acute policy concerns abroad, create China's high trade ratio.
The expansion of China's participation in international trade has been one of the features of the country's economic development.
China's Foreign Direct Investment has been currently over a billion dollars.
These three factors have played a significant role in this transformation process,
1.Initial conditions
2.structural reforms
3. implementation strategy
Relationship between trade and FDI:-
The relationship between trade and FDI are at the globalization.Results show that FDI abroad stimulates the growth of exports from countries of origin and increase the investment in trade.
FDI creats openess in the home country and trade opness creates investment opportunities.
FDI plays an important role in the capital formation and investment inflows.And due to this there is a posii impact on GDP and employment create. Any government whether it is developed or developing think that FDI will help them in reducing imports and increasing exports.