Research On The Time Lag Effect Of Resource Price Under Exchange Rate Regulation

The mining industry has always been an important field of out forward foreign direct investment (OFDI) in China, whoseraisinginvestment amounthas been ranked the top in the industries which have OFDIin the past years.Mineral resources enterprises support the economic development and ensure the safety of the strategic resources through the implementation of OFDI for metal minerals and energy,such as iron ore, aluminium ore, copper ore, coal, oil, natural gas etc. To gain the resources, resource prices become the important factors,which must be considered by mineral resources enterprises in OFDI decision. At the same time, with the deepening development of economic globalization, the economic ties arecloserbetween the countries, so the exchange rate has gradually become one of the core factors of foreign economic activities as a bridge between countries.After China's exchange rate reform in 2005, under such a background that the RMB exchange rate changes more elastically and flexibly, the important effects of exchange rate changes must be considered for the OFDI from mineral resources enterprises. However, in practice, not all OFDI from Mineral resources enterprises can be carried out at the correct price for investment, besides some failures in OFDI have occured due to misjudgement for the exchange rate.Generally,before OFDI, the enterprise will assess resource prices and then decide whether to take action to invest, so why some investment occurredat the wrong time? Which period on earth plays an important role in the process of decision-making and affects the final decision?A comprehensive understanding on the time-delay from resource prices to final investment decision process, correctly grasping the effects of the time-delay process and learning how to make use of or avoiding delay impact are necessarily. In the case that exchange rate effect is more and more important, provinghow the RMB exchange rate change on the resource price level and the lags, discussing the inner link between the exchange rate and resource price levels, and revealing the relationship between them will help to enhance the efficiency of OFDI from mineral resources enterprises.Based on the existing research, combined with the OFDI practice of mineral resources enterprises, an analysis on the effect of exchange rate changes to the OFDI has been given, and the time-lag effect of resource price has been put forward. We think thatthe longer the time-lag effect of resource prices exists, the longer the time for investment decision-making lasts, and this will lead to a greater gap between the actual situation and the target.Then, combining the exchange rate factor and resource prices change, this paper discussed the influences of resources price time-lag effect on the OFDI from the mineral resources enterprisesunder the asymmetry influence of the exchange rate. Finally, based on the theoretical analysis, an empirical analysis was carried out according to the micro data of the OFDI projects from the mineral resources enterprises, and the time-lag effect index was builtto calculatethe effect. The results show that the exchange rate affects the OFDI asymmetrically. And when considering the related factors, resource prices time-lag effect is very significant. Then if the enterprises only consider some influencing factors, it leads to underestimate time-lag effect, thus cause timing mismatch for investment,even to loss. If the enterprises can judge the macroeconomic situation accurately, or have an accurate understanding about the investment environment, it can make investment decisions according to the exact resource prices time-lag, which will be conducive tothe enterprises to grasp the timing, to promote the efficiency of the OFDI from mineral resources enterprises.Finally, conclusions and enlightenments have been given.The studywill help to find the law on the influence of mineral resources prices, and rich exchange rate asymmetric transfer theory and OFDI theory. And this study can be an important reference for the effective utilization of the exchange rateand grasping the timing of the price by mineral resources enterprises, and also is of great significance to guide the practice of the OFDI from the mineral resources enterprises.