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Trade Liberalization and Trade and Capital Flows: Evidence from China Pilot Free Trade Zones

1 month ago   |   By The World Economy

Abstract
China established several Pilot Free Trade Zones in recent years as a major step to deepen trade liberalization. In this paper, we investigate the impact of 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 model with the staggered establishment dates of the FTZs. Our results show that FTZs promote local foreign direct investment and outward foreign direct investment , but their influence on goods exports and imports remains limited.
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