The FDI And The Change Of Renminbi's Real Exchange Rate

After exchange rate reformation,The real effective exchange rate of RMB have beening appreciated.Actually,There are many factors affected the long run of real exchange rate,and the foreign direct investment is the one of them. FDI affects real exchange rate depending on it is used demestic consumption or capital accumulation,and capital accumulation depend on capital is used in tradable or nontradable industry. Follow the idea of capital accumulation,from the point view of the Balassa-Samuelson effect,This article test that the FDI will urge RMB revalution through Technology advancement,especially the tradable industry's Technology advancement. The test adapts 28 provicies'datas from 1995 to 2003,and uses econometrics theory to examinate the facts effecting the trend of real exchange rate.The long time means remove the effect of monetary supply,and the price is perfect elasticity.This is a hypothsis of monetary neutrality.under the hypothsis of Balassa-Samuelson effect,demand facts will not effect the trend of real exchange rate in the long run.But actually,it doesn't satisfy those hyposises in china.Under a extended Balassa-Samuelson frame,This article construct a econometrics model controlling demand variables. Moreover,The FDI's technology advancement effects has been devided into direct effect and indirect effect in this article, and then inspect the channels through which the FDI in eastern, middle and western affect the real exchange rate respectivlly.The results of this research indicate that productivity is the one of the most important factors that urge RMB revolution, especially for eastern, it is the most basic factor for explanating revolution. But for middle and western area,demand factors,such as government expense and personal expense favor,are the most important factor for affecting real exchange rate's trend.It may be because that productive factors can't be mobile freely in the long run for middle and western area. FDI can urge real exchange rate revolution through technology advancement effect.but the channels are different.The results indicate that eastern has abundant human capital and consummative financial market so that the adsorptive capability is very strong,so eastern urge real exchange rate revolution through technology spillove mainly.But the adsorptive capability of middle and western area is limited,especially for western,it haven't got the threshold of technology spillove,soFDI affect technology advancement through direct channel mainly.