Rmb Exchange Rate Changes On Taiwan Businessmen's Investment In The Mainland

Researching and investigating factors that impact investment decisions of manufacturers has been a major subject of investment theories. Theories such as accelerate theories, current classic investment model, Q theories and cash flow investment theories, propose that output level, overall cost efficiency, Q value and cash generating ability respectively are the decisive figures that impact manufacturers' final investment decision. On the other hand, under globalization, international trade, growing at a rapid rate, is increasing its importance and contribution to overall economic activities. As a result, exchange rate fluctuation is becoming key factors that affect manufacturers' profit margin. Taiwan is a typical case of which Taiwanese investors obtain a substantial portion of their investment income from import. Therefore the purpose of this research is to examine the impacts of exchange rate fluctuation have on Taiwanese investors' investment decisions toward mainland China based on investment theories.For Taiwanese investors, the changes in the number of investment projects and amount invested have reflected a variety of issues and investment incentives. In this time period, mainland China's foreign capital investment policy and political relationship with Taiwan are instable either, which interfered and negatively impacted Taiwanese investors' investment decisions. These influential factors further complicate the analysis.The main purpose of this research paper can be concluded into the followings.(A) Study research papers regarding motives, investment volume, market niche choices and etc. of Taiwanese investors who made investments in mainland China. Analyze their current investment status and conditions in mainland China.(B) Examine impacts of exchange rate fluctuation have on Taiwanese investors' investment decisions toward mainland China based on investment theories.(C) Compile research data, evidence, studies and empirical research findings to look for influences mainland China's strategic layout exert on Taiwanese investors' investment pattern. Extend and relate the finds to possible impact of RMB appreciation on Taiwanese investors' investment behavior, their corresponding degree of tolerance to RMB appreciation and actions/strategies in response to the appreciation.(D) In addition to the understanding of RMB appreciation's impact on Taiwanese investors, serve as a reference for related economic policy and for manufacturers who are looking for business opportunities in mainland china, collecting market data, hedging business risk, and making investment plans or decisions.Finally according to Hooper and Kohangen (1979), exchange rate fluctuations are also reflected in relative prices of commodities in international trade. Currency risk further decreases international trade volume. For manufacturers who rely heavily on export or import, currency risk would have a more material impact on their sales and thus income. The negative shock of decrease in income or return would distract many of the potential foreign investments away. From empirical evidence, an increase in degree of currency fluctuation would result in less investment, and this relationship, an appreciation (depreciation) resulting in an increase (decrease) in amount of investment, has been proven to exist among the Taiwanese manufacturers investing in mainland China. This is especially the case for manufacturers whose sales were largely exports. They are more widely exposed to currency risk, thus their decision making is more sensitive and responsive to currency fluctuations.