An Empirical Study On How RMB Exchange Rate Drives Real Estate Foreign Direct Investment

The health improvement of real estate industry is connected with the quality of resident and national economic. And a lot of foreign direct investment(FDI) is putted in real estate industry. In one hand, the FDI brings experience in administration, technology and abundant capital which are good for the improvement of real estate industry. In another hand, the more FDI the more risk for china real estate industry. The industry thinks highly of market. And the real estate can't be moved. So the FDI theory that focuses on market and export is not used to analyze the real estate industry perfectly. The paper uses for reference the cost theory, wealth theory, risk theory and the demand theory to analyze real estate FDI, trying to find out change of the FDI and how we can deal with the change.The paper picks Guangzhou for example. The dates range from 1980 to 2009. The paper uses GARCH model and VAR model to analyze how the changes and fluctuation of RMB effective exchange rate affect the city's real estate. And on the basis of Keynes's theory, the paper takes market and need into account. The analysis shows that:the appreciating of RMB effective exchange rate will cause Guangzhou real estate FDI reduces. But fluctuation of RMB effective exchange rate provides positive effect to Guangzhou real estate FDI. In light of conclusion of the paper, we suggest that we can take some measures to deal with the economic situation, like enlarging the needs of market, raising the quality of labor, keeping the policy of exchange rate stably, and making sure the social economic improve steadily. Depending on that, we can draw much more long-term and reasonable real estate FDI into our market.