How FDI influences the triangular trade pattern among China, East Asia and the U.S.? A CGE analysis of the sector of Electronics in China

This paper uses a computable general equilibrium model to simulate the FDI inflow in the Electronics sector in China. Our aim is to capture how the causation chain works through production networks and triangular trade pattern. The results reveal that China is a production base and export center for Electronics, with a heavy dependence on East Asian Electronics supply. Meanwhile, the U.S. and Rest of world are important markets for Electronics exports. China collaborates with East Asia in the production networks but competes with East Asia on the exports to the U.S. and ROW. The shock of FDI reinforces the pivotal role of China and intensifies its exports without any remarkable change on the pattern of the geographical destiny of its Electronics exports. The Chinese trade links and production division remain unchanged. However, China takes up more of the world market share released by their competitors. In this sense, after the shock, the shares in imports of Electronics of rest of regions, thus, have changed noticeably.