The Influence Of The Real Exchange Rate Of RMB Changes Against Vertical FDI And Horizontal FDI

With the past 30 years'phased process of the opening up, China's FDI development and the reform of RMB exchange rate system also showed a certain gradual characteristics. Under this background, it has important theoretical and practical significance to distinguish different types of FDI by occupying the market or exploiting cheaply-priced resources of host country, to study the sensitivity of different types of FDI when exchange rate level and volatility change, and to study of the influence of bilateral real exchange rate on FDI among Chinese and Multi-investment partners through a larger sample.Based on the above considerations, this paper generally divides the whole FDI into vertical FDI and horizontal FDI, and deeply studies the influence of the real exchange rate of RMB changes against vertical FDI and horizontal FDI through three levels including the analysts of influence trends, influence mechanisms and influence effects.First, this paper describes the movement trend of vertical and horizontal of FDI under RMB exchange rate changes from the point of views of the overall size of FDI, investment industry structure, investment sources, foreign investment enterprises during the time period 1992-2007.Then, the static micro-analysis base on the maximize profit motivation of transnational corporations'FDI and a simple production function of decreasing returns to scale to find out the influence mechanism of RMB exchange rate level changes on two types of FDI:the currency appreciation of host country will curb vertical direct investment and promote horizontal direct investment.In empirical part of this paper, a knowledge capital expansion model integrating vertical FDI and horizontal FDI is established to analyze the influence effects of RMB real exchange rate on FDI from the national identity. The empirical results point out that China's foreign direct data support the knowledge capital model rightly, and make some important conclusions:the real exchange rate of RMB appreciation has a certain degree of negative influence on FDI, but its volatility has weak negative influence on FDI. Though vertical FDI is more than horizontal FDI, the overall FDI prefers the Chinese market to the labor costs.At last, a few of directional policy recommendations are given to promote FDI:Trying our best to improve the overall economic level and expand the size of the market; Achieving the appreciation of the level of the RMB exchange rate forwardly and gradually under control; Making a reasonable guide of FDI investment to alleviate the pressure of rapid appreciation of the RMB.