Since it adopted an open-door policy and launched economic reforms in 1978, China has experienced spectacular growth in its GDP and exports. China has become the world’s largest exporter since 2009 and its exports have grown much faster than imports, resulting in a huge trade surplus over the years. Meanwhile, China has also been one of the largest recipients of foreign direct investment (FDI) in the world. Its experience with exports and FDI undoubtedly has important implications for other developing countries. Rapid growth in China’s exports appears to have been due to its increasing involvement in processing trade, which is facilitated by FDI. Trade intermediaries and indirect export through Hong Kong also seem to have played an important role in this process. Intermediary firms play an important role in international trade, especially in Asian developing countries, and recent research in international trade has begun to examine the role of intermediary firms in export expansion. The chapter provides an updated picture of China’s exports and FDI by surveying the most recent research on this topic. It also identifies the challenges China faces, and explores the policy implications.
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