The Impact Of The RMB Exchange Rate On Inflow FDI And Outflow FDI In China

Since China's reform and opening up,Chinese absorption of foreign direct investment has obtained great achievement,at the end of 2015 China's attracting FDI of $126.27 billion,accumulative total of $1.605329 trillion,At the same time,C hina's foreign direct investment has also made significant results,China's foreign direct investment(OFDI)totaled $1456.7 billion in 2015,accumulative total of $10978.6 trillion.The inflow FDI and china's foreign direct investment outflow has greatly promoted the development of Chineseeconomy.As a country's macroeconomic regulation and control important economic lever and control measures,exchange rate plays an important role in macroeconomic.And the change of exchange rate adjustment will be from inside to outside,from the micro to macro aspects and all levels of a country's economic operation a profound and extensive influence.Therefore,the purpose of this study is to examine the RMB exchange rate changes on C hina's inflow FDI and the impact of foreign direct investment,In this paper,the RMB exchange rate changes mainly refers to the exchange rate level changes and exchange rate fluctuations.This paper first reviewed the domestic and foreign related research literature and international direct investment theory,and expounds the mechanism of action of exchange rate movements affect the inflow FDI and outflowFDI;Secondly expounds the exchange rate level,inflow FDI and the development of OFDI outflow,and made a qualitative analysis to the correlation between them;Followed by using Cointegration Test,Vector Error Correction Model and the granger causality Test and other methods to investigate the RMB real exchange rate changes and the correlation relationship between the inflow FDI and outflow FDI in C hina.Cointegration test and error correction model results show that in the long run the rise of the RMB exchange rate level will promote FDI inflows and outflows of OFDI exchange rate each rose 1%,a 8.56% increase in FDI inflows amount,OFDI outflow will increase 2.99%,exchange rate fluctuations will promote FDI inflows but inhibits the OFDI outflow,exchange rate fluctuations in their increased by 1%,a 7.48% increase in FDI inflows amount,OFDI outflow will reduce 2.87%;And the RMB exchange rate level in the short term each rose 1%,amount of FDI inflows will reduce 0.4%,OFDI outflow will reduce 3.02%,exchange rate fluctuations in their increased by 1%,a 0.06% increase in FDI inflows amount,OFDI outflow will increase by 0.22%.So under the condition of existing in the current RMB devaluation expectations,the C hina's government should establish corresponding policy to slow the RMB depreciation,control of exchange rate volatility,thereby better guard against exchange rate risk.Therefore the government should establish corresponding policy to avoid appear again depreciated,but allow conveniently reduced,due to the impact of market supply and demand in modest fluctuations in strategy under the background of existing in RMB depreciation anticipated,at the same time complementary with the foreign exchange market intervention in real time to avoid big devaluation,promote market expectations so as to better guard against exchange rate risk;Second should improve the efficiency of the use of FDI and foreign direct investment efficiency,actively introduce high quality FDI and promote the outflow of OFDI,promote the adjustment of industrial structure.