Study on the relationship between China´s exports and outward foreign direct investment—Are they substitute or complement?

China´s outward foreign direct investment gets rapid development since 2002. Does the increasing outward foreign direct investment increase the China´s exports or replace the exports? Using the time series data from 2004 to 2010, this paper studies the relationship between China´s exports and outward foreign direct investment. The result shows that the business services outward foreign direct investment replaces the exports, while the manufacturing outward foreign direct investment increase the exports. This result indicates that the relationship between outward foreign direct investment and exports of China is more substitute than complement. It can be explained that China´s exports depends primarily on the low labor cost advantages. At the same time, the history and scale of China´s outward foreign direct investment is too short and too small. So it can do little influence on China´s exports.