China 's Export - Oriented Direct Investment

With the further implementation of exchange rate regime reformation, RMB began to appreciate. At the same time, China’s outward direct investment (ODI) has developed rapidly. The primary goal of this paper is to investigate the impact of exchange rate fluctuation on China’s ODI.Empirical analysis of ODI from1982to2010was adopted to detect the relationship from two aspects:exchange rate level and the volatility of exchange rate.Exchange rate level in this paper was real effective exchange rate (REER) and exchange rate volatility was calculated by GARCH model. After ADF and co-integration test of time series, a regression model of ODI was established including GDP, REER, and variance of exchange rate as independent variables. It is concluded that, firstly the movement of exchange rate level has a significant negative correlation with ODI; secondly, GDP has a positive correlation with ODI; thirdly, there’s no significant evidence to indicate there is a relationship of exchange rate volatility and ODI. Then a qualitative analysis was done to observe theinfluence of RMB appreciation on industry distributionand investment method of ODI.