There is a time lag in changing the layout of competitive advantages. Some labor-intensive production activities and services are usually outsourced to developing nations like China and India, while it will take a certain period of time before the developed countries (where the production cost is high) could create new jobs and develop new export advantages.
Trade imbalance could expand during such a period of time lag. 3. FDI (particularly, of MNCs) has been playing a dominant role in cross-border outsourcing into China and in changing the landscape of trade balance. China has grown into a re-export processing center mainly by foreign-funded enterprises, with the supply chains increasingly expanded and value-added steadily enlarged.