Document Type
Article
Keywords
Trade flows, foreign direct investment, regulatory arbitrage, round-tripping
Abstract
This study uses reported exports and imports figures of China-Hong Kong and China-Thailand trade to examine the relations among trade, foreign direct investment
Publication Date
11-27-2006
DOI
10.2139/ssrn.972174
Recommended Citation
Fung, Hung-Gay; Yau, Jot; and Zhang, Gaiyan, "Market Impediments, Trade, and Foreign Direct Investment: Evidence from China's Round-Tripping" (2006). Ed G. Smith College of Business Faculty Works. 29.
DOI: https://doi.org/10.2139/ssrn.972174
Available at:
https://irl.umsl.edu/business-faculty/29
COinS
Comments
This study uses reported exports and imports figures of China-Hong Kong and China-Thailand trade to examine the relations among trade, foreign direct investment flows, and tax-induced market impediments. The empirical results, largely consistent with theoretical models, support several conclusions. First, the spurious transfer of funds to and out of China, via under-reporting exports and over-reporting imports, closely follows the preferential tax incentives such as tax breaks to foreign investors. Second, exports under-reporting is negatively related to rebates for export. Third, imports over-reporting is negatively related to import tariffs. Finally, under-reporting of exports and over-reporting of imports appear to be most common in state-owned firms.