Research On The Impact Of RMB Exchange Rate Movement To Foreign Direct Investment

With the coming of the era of intelligence, economic relationship are much closer between countries, strengthen of fund mobile in the world, the international capital can not be ignored in a nation’s economic growth. Since China reform and opening up, as the biggest developing country in the world, speed and scale of development are high-profile, international capital has played a great role in promoting, Chinese FDI is superpower, the FDI inflows after the United States in the world in 2013. In international finance, the impact of exchange rate on FDI is a classical problem, more and more scholars study the influence of the RMB exchange rate on FDI based on overall or country FDI, drawn the different conclusions. Under the background and basis, this paper mainly divides into five chapters, the paper from theory and current situation with theoretical and empirical methods study the effect of exchange rate on the total amount and sectors of industry of FDI.The first chapter and second chapter of the paper introduce the present situation analysis and the theory background, introduced the status quo and theory development of this research; Chapter three on the basis of the international direct investment theory and predecessors’ research under the condition of D-S monopolistic competition assume from the consumer utility function derivation the expansion of the basic gravity model. And use the lasso method to eliminate collinearity variables, the selected variables are explained variable to explain FDI.The chapter four from the total amount and divisions research the impact of exchange rate on FDI with the empirical methods:the total research study the impact RMB exchange rate on FDI from the exchange rate change, expectation and fluctuations with the 15 years data from 2001 to 2015 to the empirical research; divisions research selected the five services comparative to industry; in the divisions research we selected 16 countries calculated import and export trade on the basis of the weights to calculated the different industries of exchange rate, the empirical study selected nine years quarterly data from 2006 to 2014. The fifth chapter is conclusion and prospect.From the theoretical and empirical test we found that expectations and volatility of exchange rate has little effect on foreign direct investment, fluctuations mainly is short-term impact, the change of real effective exchange rate has great influence on FDI inflows. Divisions study found that exchange rate changes to industry and service has opposite effect, revaluation of RMB has restrained FDI inflows in industrial sectors and had promoted services FDI inflows. The FDI inflows into the industrial sectors is mainly export-oriented FDI and inflows into the service sector is mainly market-oriented FDI in our country. This paper has researched the impact of exchange rate on foreign direct investment in China in consideration of some control variables. The paper provide certain reference for the improvement of the countermeasures and suggestions to the government and industry policy.