The role of FDI in domestic exporting: Evidence from China

► Domestic firms respond to an increase in the presence of FDI by increasing their exports despite the fact that the increase in foreign presence can drive up the production cost and make the domestic market more profitable. ► Chinese domestic firms indeed increase their exports for a given rise in FDI inflow. ► A 1 percent increase in foreign presence brings about a 0.57 percent increase in domestic exports.