Research About The Impact Of Foreign Direct Investment On The Foreign Exchange Reserves

As the development of globalization, foreign direct investment has greatly promoted China's economic development, at the same time, China's international balance of payments showed a double surplus, and foreign exchange reserve growed rapidly. The purpose of this paper is to analyze the impact of FDI on China's foreign exchange reserves.Product life cycle theory, marginal industry expansion theory and international production compromise theory analysis of the causes and conditions on international direct investment, and are used to explain the status of foreign direct investment. The moderate severity scale theory of the foreign exchange reserves, which consisted of mercantilist theory, balance of payments structure theory and the theory of crisis prevention, analysis the reasons for the growth of East Asia's foreign exchange reserves. based on the theories of the foreign direct investment theory and the moderate severity scale theory of foreign exchange reserves, this paper further analysis of the path that foreign direct investment impact of foreign exchange reserves, According to the theoretical analysis, we establish the models combined with the international balance of payments and foreign reserves factors. through the Cointegration tests,we found that foreign exchange reserves exist a stable cointegration relationship with the processing trade, foreign direct investment and the expected RMB exchange rate. Through the estimated VAR model, we Concluded the path that the international industrial transfer impact of China's foreign exchange reserves.Finally, in accordance with the theoretical analysis and empirical analysis, we propose some policies about China to undertake international industrial transfer and the use of foreign exchange reserves. so, this paper argues that China should strengthen the supervision of the quality of FDI inflows, while makes use of foreign exchange reserves to upgrade the China's industry, and actively promote the other industries.