Interaction Effect of Export Trade, Foreign Direct Investment and Technological Independent Innovation in China

Abstract

China has made significant progress in the field of clean energy and sustainable development, with its photovoltaic industry technology leading globally. What has been the trajectory of China’s successful technological catch-up over the past two decades? Is China’s experience sustainable? To clarify the interaction logic between export trade (ET), foreign direct investment (FDI), and technological independent innovation (TII) in China, this paper uses panel data from 31 provinces and cities in the Chinese Mainland between 2000 and 2022. A panel vector autoregression (PVAR) model is constructed from a dynamic endogenous perspective to verify the interaction and regional heterogeneity among the three. The results are as follows: (1) The unified analytical framework shows a significant bidirectional “positive feedback effect” between ET and TII. However, FDI inhibits TII to a certain extent. Furthermore, the correlation between ET and FDI is weak. (2) The impact of ET on TII is most pronounced in the western region, while the central region sees the highest contribution rate of FDI to TII. The self-evolution effect of TII is most evident in the eastern region. This study provides suggestions for the government to develop an adaptation policy for local industrial technology conditions and establish a National Sustainable Systems of Innovation (NSSI) with multiple comparative advantages, and serves as a reference for establishing a “Chinese model”.