"Market Impediments, Trade, and Foreign Direct Investment: Evidence from China's Round-Tripping" by Hung-Gay Fung

Faculty Selected Works of Gaiyan Zhang

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Unpublished Paper

Market Impediments, Trade, and Foreign Direct Investment: Evidence from China's Round-Tripping

(2006)

Hung-Gay Fung, College of Business Administration
Jot Yau, Seattle University
Gaiyan Zhang, College of Business Administration

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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 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.

Keywords

Trade flows,
foreign direct investment,
round-tripping,
regulatory arbitrage

Disciplines

International Business and
Business

Publication Date

November 27, 2006

DOI

10.2139/ssrn.972174

Citation Information

Hung-Gay Fung, Jot Yau and Gaiyan Zhang. "Market Impediments, Trade, and Foreign Direct Investment: Evidence from China's Round-Tripping" (2006)
Available at: http://works.bepress.com/gaiyan-zhang/32/