The Effect Of RMB Exchange Rate On Foreign Direct Investment

Foreign direct investment has become the driving force of economic growth in China, in China's important contribution to economic growth. China to attract foreign direct investments originating from the reform and opening up after the 1980s, 1992 after Deng Xiaoping's talk in the South, and China's policy of attracting foreign investment, thus further relaxed waged a foreign direct investment in China's rapid growth. In the past decade, China as the world's most attractive emerging markets, many attracting direct foreign investment countries all over the region. According to the Department of commerce data shows, the 10 th five-year period, China's actual foreign totalling approximately 3830 billion, compared to the period of actual foreign 34 per cent of the total growth, which, foreign direct investment of about us $ 2860. With the deepening of economic globalization and China more areas of further opening up to foreign investment, foreign direct investment in China will become more active.21 July 2005, China was introduced to the market supply and demand basis, the reference to a basket currency regulation, a managed floating exchange rate regime, which began the Renminbi appreciation. Enter 2008, subject to the u.s. subprime mortgage crisis and other factors, the falling dollar in the background, the appreciation of the Renminbi speed the speed, 10 April 7 dollar Yuan breakthrough this integer points, relative to the exchange rate regime, the former 8.2765 RMB against the dollar has appreciated 18.4%, since the beginning of this year, growth has reached more than 4 percent. Related theory suggests that changes in exchange rate levels, as well as the exchange rate fluctuation intensity will to significant influence, China is now faced with the enormous pressure of RMB as the introduction of foreign powers, it is necessary to explore the RMB exchange rate, the inflow of FDI on the impact and influence the extent of the problem.This article select 1994-2009 Chinese Renminbi exchange rates and attract foreign direct investment, quarterly macroeconomic data on the object, choose a comprehensive reflection of national currency relative to the external value and purchasing power of the real effective exchange rate, using Cointegration, analysis of the real effective exchange rate movements and changes in the level of intensity to attract foreign direct investment, both by empirical discovery and foreign direct investment in the form of a negative correlation. Based on the conclusions, this article give the suggestions of policy of RMB exchange rate.