Trade Liberalization and Trade and Capital Flows: Evidence from China Pilot Free Trade Zones

19 Pages Posted: 5 Mar 2020

See all articles by Te Bao

Te Bao

Nanyang Technological University (NTU) - Division of Economics; University of Amsterdam - CeNDEF

Yun Dai

Lingnan College, Sun Yat-Sen University

Shuai Liu

affiliation not provided to SSRN

Date Written: February 8, 2020

Abstract

China established several Pilot Free Trade Zone (PFTZ) in recent years as a major step to deepen trade liberalization. In this paper, we investigate the impact of FTZs on the economy’s capital flow, imports and exports, as well as the underlying mechanisms. We consider the newly established FTZ as a natural experiment, manipulate with the respective establishment dates of the FTZs, and construct a difference-in-difference (DID) model. Our results show that FTZ does promote local foreign direct investment (FDI) and outward foreign direct investment (OFDI), but its influence on goods exports and imports remain limited.

Keywords: China Pilot Free Trade Zone, Capital inflows and outflows, Exports and imports, Difference-in-differences (DID) method, Trade liberalization

JEL Classification: F13, F14, F38

Suggested Citation

Bao, Te and Dai, Yun and Liu, Shuai, Trade Liberalization and Trade and Capital Flows: Evidence from China Pilot Free Trade Zones (February 8, 2020). Available at SSRN: https://ssrn.com/abstract=3534587 or http://dx.doi.org/10.2139/ssrn.3534587

Te Bao (Contact Author)

Nanyang Technological University (NTU) - Division of Economics ( email )

HSS 04-53, 14 Nanyang Drive
Singapore, 639798
Singapore

University of Amsterdam - CeNDEF ( email )

Roetersstraat 11
Amsterdam, NL-1018WB
Netherlands

Yun Dai

Lingnan College, Sun Yat-Sen University ( email )

Guangzhou
China

Shuai Liu

affiliation not provided to SSRN

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