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Trade liberalisation and trade and capital flows: Evidence from China pilot free trade zones

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  • Te Bao
  • Yun Dai
  • Yanxiang Feng
  • Shuai Liu
  • Ruixin Wang

Abstract

China established several Pilot Free Trade Zones (PFTZs) in recent years as a major step to deepen trade liberalisation. In this paper, we investigate the impact of free trade zones (FTZs) on the economy's capital flow, imports and exports, as well as the underlying mechanisms. We consider the newly established FTZs as a natural experiment and construct a difference‐in‐difference (DID) model with the staggered establishment dates of the FTZs. Our results show that FTZs promote local foreign direct investment (FDI) and outward foreign direct investment (OFDI), but their influence on goods exports and imports remains limited.

Suggested Citation

  • Te Bao & Yun Dai & Yanxiang Feng & Shuai Liu & Ruixin Wang, 2023. "Trade liberalisation and trade and capital flows: Evidence from China pilot free trade zones," The World Economy, Wiley Blackwell, vol. 46(5), pages 1408-1422, May.
    • Handle: RePEc:bla:worlde:v:46:y:2023:i:5:p:1408-1422
    DOI: 10.1111/twec.13387
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    References listed on IDEAS

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    1. Xu, Yang & Huang, Wei & Zhang, Cherry Yi, 2024. "Navigating international competition with ESG: Insights from the US-China trade war," Research in International Business and Finance, Elsevier, vol. 70(PB).

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