| Chinese government has currently launched the 12th five-year (2010-2015) plan. Paying equal attention to utilizing foreign capital and investment abroad is emphasized in 12th five-year plan. The 12th five-year plan says we shall concentrate on cultivating new advantages of international economic cooperation and competition to raise the level of opening up to the outside world in a larger scale, vaster areas and higher level.Scholars have constantly examined the relationship between import /export trade and the exchange rate at host countries theoretically and empirically,But study is not deep between FDI(inflow) \FDI(outflow) and the exchange rate. The relationship between FDI (inflow) \FDI (outflow) and the exchange rate is researched theoretically and empirically in this paper.In order to satisfy with the advancement of economic globalization and the development of domestic economic, since 21st, June, 2005, Exchange Rate System of RMB has began to carry out the system which based on market supply, reference to a basket of currencies, managed floating exchange rate. It formally means the ending of a fixed exchange rate period. While foreign investment worldwide has been in decline since the global financial crisis erupted in 2008, China's FDI (outflow) has been rising. In 2009, China's FDI (outflow) grew by 6.5 percent year-on-year to $43.3 billion, and China's 2010 FDI (outflow) in the non-financial sector was $49 billion, compared with last year's figure of $43.3 billion. China's 2010 FDI (outflow) in the non-financial sector was $49 billion", compared with last year's figure of $43.3 billion. Therefore, researches on whether the change of RMB Exchange Rate can make influence on the FDI which flows into china and whether the FDI flows into china can make influence on the RMB Exchange Rate have theoretical and practical meanings.The change of the exchange rate will produce certain influence to FDI (inflow)/FDI (outflow). Starting from an evident angle, this paper studies and analyses the impact of exchange rate of RMB on FDI (inflow)/FDI (outflow).The results indicated that GDP Per Capita is an important factor affecting FDI (inflow)/FDI (outflow).On the basis of the internal relations between them, the paper also used linear fitting method and nonlinear fitting method to predict China's GDP Per Capita,FDI (inflow),FDI (outflow),the average growth rate of FDI (inflow),the average growth rate of FDI (outflow). But such results of prediction were obviously to be modified after China raises the level of opening up to the outside world in a larger scale, vaster areas and higher level.This paper adopted America and Canada,Japan,France,Netherland to test the relationship between exchange rate and FDI(inflow)/FDI(outflow) .According to our empirical analysis, we found significantly plus effect of exchange rate levels on FDI(inflow)/FDI(outflow) inflow between America and Japan or America and Canada, while no significant signs were found between exchange rate and FDI between America and France . The results indicated that the exchange rate system is a very important factor affecting FDI (inflow)/FDI (outflow). Fortunately, practice of these developing countries has provided abundant reference experience for china in the process of capital account convertibility.The paper emphasized the government's position that interest rate and RMB exchange rate are the important prices of currency capital. Interest rate liberalization and RMB exchange rate marketization are the foundations of the socialist market economy construction. Advancing the marketization of interest rate and the RMB exchange rate reforms plays a major role in a market economy, and significantly boosts the optimal allocation of resources and economic growth. In addition, China's"Go Global"plan is to be accelerated. To support the initiatives, the government will promote RMB exchange rate marketization and interest rate liberalization. |
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