DFI, foreign trade and transfer pricing

Abstract

This article investigates the impact of direct foreign investment (DFI) on the foreign trade of China. It firstly presents a theoretical discussion of the impact of DFI on foreign trade from both macro and micro-economic views, and then provides an empirical study of the role of foreign-invested enterprises in the foreign trade of China. In particular, this article explores transfer pricing by multinational corporations (MNCs), probing their motivations and latitude to practice transfer pricing in the Chinese particular circumstances and examining empirical evidence.