The Effect Of Exchange Rate Risk On China's OFDI

Under the background of "Going out" strategy and "One Belt And One Road Initiative",the scale of China's Outward Foreign Direct Investment(OFDI)is becoming larger and larger.It has gradually become an important driving force for China's economic development and also an important source of national wealth.More and more Chinese enterprises are entering the international arena for competition and cooperation.However,since the reform of the formation mechanism of China's exchange rate system in July 2005,the degree of RMB exchange rate liberalization has gradually increased,especially after2015,the bilateral floating range of exchange rate has significantly increased,showing a trend of "depreciating firstly,appreciating and then depreciating".The uncertainty of exchange rate also makes enterprises face more uncertainty in OFDI.Exchange rate risk has become an important risk that cannot be ignored by multinational investment enterprises and directly affects their investment returns.Therefore,it is of great significance to study the impact of exchange rate risk on China's OFDI.On the basis of summarizing the relevant references on the relationship between exchange rate risk and OFDI at home and abroad,this paper finds that there is heterogeneity in the conclusion of the influence of exchange rate risk on OFDI.In view of this contradiction,this paper first theoretically analyzes the impact of exchange rate risk on OFDI.Through bilateral model to investigate the influence of exchange rate risk to corporate earnings,thus deduces the relationship between exchange rate risk and foreign direct investment,and then from three perspective-the price effect,cost effect and the cross effect to illustrate the impact mechanism of exchange rate risk on OFDI.At the same time,according to the purpose of China's OFDI,it can be divided into cost-oriented,marketoriented and mixed-oriented type.After that,the paper further analyzes the current situation of China's OFDI and the characteristics of exchange rate risk,and analyzes the impact of exchange rate risk on China's OFDI from the perspective of price and cost by combining China's OFDI status in the United States,the representative of the developed econimies,and Indonesia,the representative of the less developed economies.In empirical research part,this paper selected the 68 countries around the world in2005-2017 data as sample,exchange rate risk as a core variable,which is measured by the discrete coefficients of the exchange rate,and select the market size,labor cost,resource abundance of host countries and their trade ties with China as control variables.It is foundthat the exchange rate risk significantly inhibits the cost-oriented and market-oriented OFDI,and the degree of inhibition of market-oriented OFDI is greater than that of cost-oriented OFDI.In addition,the impact of exchange rate risk on mixed-oriented OFDI is not obvious.At the same time,from the perspective of host country's economic development,exchange rate risk has a more significant impact on low-income countries.Finally,based on the empirical conclusion,this paper puts forward relevant suggestions:the country should strengthen financial cooperation and improve the financial market;the multinational investment enterprises should increase their risk awareness,cope with exchange rate risks in accordance with their own characteristics,and finally diversify risks through multi-regional investment.