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Abstract
This chapter analyzes the relationship between bilateral imports and exports and US direct investment in China by employing the cointegration test, the Granger causality test, and the impulse response method for the period 1984–2009. The results show that US direct investment was a significant factor in widening China’s trade surplus with the US. A trade imbalance is inevitable: partly caused by the impact of US FDI through counter sales and the evolution of vertical specialization.
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