Comparison of export and outward foreign direct investment models of Chinese enterprises based on quantitative algorithm

Abstract

Since the beginning of the new millennium, the productivity differences among different enterprises within the industry, namely the heterogeneity of enterprises, have been incorporated into the general equilibrium trade model. At the same time, it brings new focus to trade theory: By analyzing the characteristics of individual enterprises, it analyzes the choice of organizational structure of individual enterprises. Outward foreign direct investment (OFDI) and international trade are the two most important international economic activities nowadays. The development of OFDI will have certain impact on export trade. The relationship between OFDI and export trade is different due to the specific national conditions of different countries. Against this background, we study the impact of China’s expanding OFDI on export trade. We should make better use of OFDI to promote the development of China’s export trade and improve the export-oriented economic mode that relies solely on exports to expand the international market. It not only has theoretical value, but also has practical guiding significance for the formulation of China’s “going out” economic and trade policy. This study introduces heterogeneity into the international expansion behavior model of Chinese enterprises in the context of global value chain specialization. Taking the position of Chinese enterprises in the value chain as the location dimension, we have integrated and expanded a new concept of enterprise advantage based on the value chain status from the research category of international trade theory. In this paper, we introduce the behavior of competitors into the dimension of enterprise decision space and construct an endogenous dynamic equilibrium model of Chinese enterprises’ export trade and OFDI. The purpose is to provide theoretical explanations and practical guidance for Chinese enterprises’ export trade and endogenous optimization decision making in the process of deepening the division of labor in the global value chain.