Study on the Trade and Investment Promotion Effect of Free Trade Pilot Zone Establishment-Analysis based on PSM-DID model

Abstract

As a key part of China's opening up to the outside world to realize the important change from "bringing in" to "bringing in" and "going out" at the same time, it is particularly important to evaluate the implementation effect. Based on the provincial panel data of 31 provinces and cities in China from 2009 to 2019, this paper uses the double difference propensity score matching method (PSM-DID) to evaluate the impact of the establishment of China's Free trade zones (FTZs) on the country's import and export trade and domestic and foreign investment. The results show that the establishment of FTZs can, to a certain extent, promote the growth of intra-regional exports, imports and outward FDI. In particular, it is worth noting that the establishment of FTZs shows a significant negative effect on OFDI. In addition, the extended analysis considering regional heterogeneity further reveals that the effects of FTZs establishment on trade and investment in coastal and non-coastal regions show heterogeneous characteristics. In the context of FTZs establishment, tariff concessions and preferences, promotion of trade liberalization and business environment facilitation are important mechanisms for promoting trade and investment.