Abstract: Whether China’s outward FDI is a substitution or has promoted the export has been a focus in the debates of the academic circles. Through introducing the analytical perspective of binary margins, this paper theoretically interprets the phenomenon of the coexistence of the export“substitution effect”and the“complement effect”of outward foreign direct investments. And at the same time, it provides the empirical evidences from China. By applying the systematic GMM method, this paper makes use of the unbalanced panel data from 184 host countries from 2007 to 2015 to conduct an empirical test. The results show that the extensive margin of China’s outward FDI has a complement effect on export, while the intensive margin has a substitution effect on export, which supports the theoretical analysis. Moreover, such export effects of binary margins have significant heterogeneity in the types of trade products, the income levels of host countries and the investment motives.

Key words: outward FDI; intensive margin; extensive margin; export substitution effect; export complementation effect