An investigation into China's export-share policy for foreign-invested firms : a thesis submitted in partial fulfilment of the requirements for the degree of Master of Arts at Massey University

Abstract

This thesis analyses China's export-share policy; a policy that requires foreign-invested firms to export a certain minimum share of their production. The initial discussion focuses on the development of China's foreign investment and foreign exchange control policies since the commencement of the Open Door policy. Data on foreign-invested firms is analysed to determine whether (i) the export-share requirements affect investor behaviour, and (ii) the pattern of requirements imposed has changed over time. The effect of export-share requirements on domestic welfare, foreign investment, and the level of foreign reserves are then examined within a partial equilibrium framework, and, more extensively, within a general equilibrium model that allows for urban unemployment and various forms of trade protection. Finally, the results of the theoretical analysis are applied to the earlier discussion on China's foreign investment and foreign exchange control policies. It is found that the various policy goals pursued by China have conflicting optimal export-share requirements and, even though many of the theoretical results are ambiguous, the export-share policy implemented by China is probably non-optimal.