**6. Conclusion**

This study aims to investigate the relationship between trade and FDI in four East Asian economic transition countries, namely the China, Cambodia, Lao PDR and Vietnam. Complementary effect between FDI and trade is found when estimated using FDI flow variable. To be specific, the effect of FDI on trade is shown the highest in the order of Vietnam, China, Cambodia, and Lao PDR although the coefficient of FDI is insignificant in Cambodia. When estimated using FDI stock variable, the complementary relationship between FDI and trade weakens, and even substitutability effect is found in China at .1 significance level. Interestingly, the coefficient of FDI is positive and significant in Vietnam in both cases.

Other explanatory variables are also considered, which are human capital proxied by expected years of schooling, GDP, Domestic bank credit to private sector as a proxy for financial development, exchange rate, tariff rate, and WTO accession. Effects of GDP and human capital on trade are shown positive and significant in most cases except in Cambodia when FDI flow is utilized. Moreover, impact of financial development, tariff and exchange rate varies by model and country. Finally, the impact of WTO accession on trade is shown positive but insignificant, except for Cambodia, which shows negative coefficient when FDI stock is utilized.

These findings provide more insight into the regional and global implications of FDI and trade in East Asian economic transition countries. First, as impact of FDI on trade is shown positive, these countries should carefully promote FDI policies to maximize the benefits of FDI on trade and economic growth. Moreover, policy implications can be derived for the countries that have been experiencing economic transition such as Myanmar, Cuba and the country such as North Korea in the future.

*FDI and Its Impact on Trade in the East Asian Transition Economies DOI: http://dx.doi.org/10.5772/intechopen.97214*
